Saudi auto loans fall in second quarter due to chip shortage

RIYADH: Saudi banks extended fewer auto loans in the second quarter as the sector struggled with a lack of supply due to a global shortage of semiconductors.

Banks in the Kingdom lent SR15.53 billion ($4.14 billion) to consumers to buy vehicles in the three months to the end of June.

According to data from the Saudi Arabian Central Bank (SAMA), this is down 0.5% from last year and 1.9% from the previous quarter.

The drop was caused by a shortage of semiconductor chips, Umar Khan, sales general manager at Kia Motors Saudi Arabia, told Arab News. “There’s a demand for around 5,000 cars over the next five months, but all we can get is 1,500.”

The shortage of semiconductor chips is expected to cost the global auto industry $110 billion in revenue in 2021, according to a May report from consultancy AlixPartners.

Few automakers are unaffected by shortages that are expected to last through 2022. GM said Sept. 2 that downtime at eight plants in the United States, Canada and Mexico would continue until two weeks.

There was also a scramble to buy vehicles in June or July last year to avoid the VAT increase to 15%, Khan said.

Car loans from finance companies, which account for a larger share of car finance in Saudi Arabia than banks, fell 9.5% in the first quarter, according to SAMA, which has not yet released second quarter data. trimester.

Auto sales this year have also been hurt by rising shipping costs, which need to be passed on to consumers, according to Bader AlJomaih, marketing director for Yokohama in Saudi Arabia.

Shipping container prices have more than doubled in the past year and container freight rates have risen 351% over the same period, according to shipping consultancy Drewry.

The shortages have been exacerbated by the recent temporary closure of a key terminal at the Chinese port of Ningbo-Zhoushan, the world’s largest port by cargo tonnage.

The terminal was locked down on August 11 after a port worker tested positive for the Delta variant of the coronavirus, and did not resume normal operations until August 25.