Industry Trend Analysis - Rising Costs Will Temper Car Sales - APR 2018
BMI View: Jordan's new vehicle market will see relatively solid growth of 3.6% in 2018, but ongoing austerity measures, which are increasing the cost of living, will see the passenger car market lag the commercial vehicle segment as consumers remain under pressure.
After very marginal growth in 2017, we expect the Jordanian vehicle market to pick up pace in 2018, although ongoing austerity measures will restrict growth to 3.6%. The austerity measures being implemented by the Jordanian government will place significant strain on consumers, keeping a firm lid on new passenger car demand in particular. As such we expect the commercial vehicle (CV) segment to outperform with growth of 4.8% compared with 3.0% for passenger cars.
Out brighter outlook for the CV segment stems firstly from our Country Risk team's forecast for real GDP to expand by 3.1% in 2018 and 3.2% in 2019, up from an estimated 2.3% in 2017. This higher growth environment should continue to encourage Jordanian small- to medium-sized businesses to invest more in fleet renewal. We believe that this trend has already commenced, with Kia's Frontier LCV the top-selling model of all segments in Jordan during 2017. We also expect Jordan's manufacturing sector to expand in 2018, thanks to improving security in neighbouring Iraq and stronger demand from other key export markets. Iraq has traditionally been a major trade partner for Jordan ( see chart below), such that we believe the re-opening of the Karameh border crossing between the two countries will act as a substantial impetus to manufacturing growth.
|Key Exporters To See Stronger Growth|
|Jordan - Exports By Destination, % Of Total|