Riyadh's infrastructure drive boosts construction equipment sales in Saudi Arabia

03 June 2014

Rising government expenditures bolstering the kingdom’s construction market

The rapid increase in construction activity in Saudi Arabia has boosted construction plant and equipment sales in the country, according to leading plant dealers in the kingdom.

Riyadh-based Zahid Tractor, one of Saudi Arabia’s leading construction equipment companies, which supplies machinery from the US’ Caterpillar, Sweden’s Volvo and France’s Renault, said it had witnessed strong sales growth in the kingdom over the past year, fuelled by the launch of government-driven projects in sectors, including education, infrastructure, and transportation.

“Saudi Arabia was the least impacted in the aftermath of the financial crisis and therefore the industry remained strong,” says Khalid el-Shurafa, marketing manager at Zahid Tractor. “What we have noticed in recent years is that our growth figures more or less follow the construction sector growth numbers that are announced in the Saudi economic reports.”

“The construction sector is one of the highest growing sectors in the Saudi economy due to the massive government expenditures that are driving development projects in various cities and sectors of the economy,” he says. “Growth is driven by growing demand, which in turn is fueled by the govermental release of projects in various sectors of the economy such as education, infrastructure, railways, transportation, mining and residential. There are trends associated with the size of the projects being released and we now see multiple joint ventures forming for project contracts just as recently seen in the Riyadh public transit system.”

Targeted initiatives

El-Shurafa’s comments followed the launch of Caterpillar’s latest excavator - the 320D L Series 2 excavator, which has been specially designed for the extreme working conditions encountered on Saudi Arabian construction sites, and also to cope with types of contamination that is often found in diesel fuel in the kingdom.

It is a sign of the growing importance of the Saudi Arabian construction market that Caterpillar, the world’s biggest construction equipment manufacturer, has upgraded one of its biggest-selling diggers as a result of feedback from its Saudi customers.

Saudi’s contruction boom is also driving an increase in bu”siness start ups in the kingdom, which Zahid Tractor has identified as as an important new market.

In response, it launched in May its Future Contractors Program, an initiative to provide individuals or small and micro enterprises with finance for construction machinery.

“The Future Contractors Program is designed to facilitate the future contractors of our country,” says El-Shurafa. “We recognise that there is huge potential for the construction industry in Saudi Arabia, and we also realise that many individuals and SMEs may not have the financing to enter this important sector. Through this program, we provide a swift credit process so that customers, regardless of capital, can acquire the necessary construction machinery as quickly as possible.

The initiative has been developed in partnership with AJIL Financial Services Company, which launched its Small and Micro Enterprises Partnership (SMEP) program in 2011, which provides financing for assets that include power generation sets, material handling equipment, industrial products, medical equipment, commercial vehicles and commercial property.

Booming manufacturers

Other manufacturers have also reported strong growth Saudi construction equipment sales.

Japan’s Komatsu reported a 86.6 per cent jump in sales in the Middle East over the past year, which it attributes, in part, to the formation of a joint venture between local Abdul Latif Jameel Group and Japan’s Sumitomo Corporation to distribute Komatsu heavy equipment brands in the kingdom.

Germany’s Man Group says its Middle East operations recorded a 40 per cent increase in sales in the first quarter of 2014 in its truck segment, with Saudi Arabia being a key market.  

In March, the company recorded its highest sales in the region since 2008. And with sales lagging globally for Man, the Middle East is playing an increasingly important role for the truck maker.

Currently, the Middle East contributes 9.3 per cent of the global sales volume of trucks compared to 6.1 per cent in 2013. The region also contributes 7.8 per cent of the global order intake volume of trucks compared to 6 per cent in 2013.

“These figures emphasise the growing significance of Middle East operations for the Man Group,” says David Van Graan, head of Man Centre Middle East and vice president of sales and marketing. “In March, we recorded the highest sales since 2008, which is a clear indicator for the recovery of major economies in the Gulf such as the UAE, Qatar, Oman and Saudi Arabia.”

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