Oman - Automotive

Overview

Oman's economy is based primarily on petroleum and natural gas, which are expected to account for 78% of the government's revenue. Oman's proven recoverable oil reserves are estimated at 4.8 billion barrels, though the Ministry of Oil and Gas estimates that there are potentially 38 billion barrels of recoverable oil.

The Omani government and private sector have embarked on multibillion-dollar plans for investment in upstream and downstream oil and gas projects. The project list includes: pipelines, enhanced oil recovery systems, steam processing units, gas processing units, refineries, and petrochemical plants. Since the oil and gas industry represents 51% of the country’s GDP, an estimated 83% of the country’s exports and around 70% of the government’s revenues, these projects will continue to represent strong export potential for American firms in the foreseeable future.

The long-term 'Oman Vision 2020' development plan highlighted the need for the Omani economy to diversify through a process of Omanization, industrialization and privatization. The largest industrial investments target is ports, refineries, steel, aluminium and other plants, power and water generation projects, wastewater and solid waste management operations.

Oman's accession to the World Trade Organization in October 2000 facilitated Oman’s integration into the global marketplace. WTO-consistent protection of intellectual property, market access, and customs valuation made Oman a more dependable trading partner and a more attractive destination for majority foreign-owned investment.

Automotive Sector

A sizeable market exists in Oman for meeting the Sultanate’s transportation needs. In addition to passenger vehicles, Oman is importing construction, airport and port equipment. Highlighting its infrastructure investment initiatives are the government’s plans to construct an additional runway and new terminal complex at Muscat International Airport and an expanded terminal at Salalah Airport. The government also plans to construct new regional airports, industrial and transhipment ports. Road construction is another major focus of regional development, with multi-million dollar projects, such as the capital’s Southern Expressway, underway in various parts of Oman.

Vehicles (passenger cars, specialised industrial and transportation vehicles and buses), as well as spare parts, automotive products, maintenance and garage equipment are the best prospects for western manufacturers and suppliers in this growing market segment. One of the factors of market growth is the improvement in the life standards of the population. Approximately 30,000 young Omanis enter the workforce each year. Most of these new entries look to government employment, as Omanis make up 84% of the public sector’s labour force. Only 18% of the private workforce is Omani.

Owning a personal car is considered the next appropriate step after securing a position. The very fact that public transport system in Oman has predominantly remained underdeveloped calls for the possession of a personal car for a young Omani intending to join the workforce sooner or later. There is a good demand for entry-level used cars from such a segment of population, which creates a further growth in spare part and consumables market. The various types of vehicles in use in Oman include 4-wheel drives, saloon cars, sports utility vehicles, pickup trucks, luxury vehicles, sports cars, sedans and hatchbacks, trucks, minis and convertibles. Among those most popular are Audi, Chrysler, Citroën, Daihatsu, Dodge, Ford, Great Wall, Hino, Jeep, Kia, Lexus, Mazda, Peugeot, Seat, Skoda, Toyota, and Volkswagen. The all-terrain vehicles from Yamaha and Polaris, motorbikes and personal transporters are also present.

Oman is a very price sensitive market and there are a large number of customers looking for good quality, pre-owned vehicles. A lower per capita income, as compared to Saudi Arabia and UAE is also the reason why small cars are very popular in Oman. The used car business is fast assuming an organised industry status, as some of the established authorised car dealers already have their used car business divisions in operation for the past two years. The key to success in used car business is the fast movement of cars, so re-export of those to the neighbouring countries in the Middle East has been in place for a long time.

The tire, lubricants and batteries sector in Oman is going through a healthy growth curve over the last couple of years thanks to the spurt in sales of commercial as well as personal automobiles. And in an effort to capitalise on sales opportunities, almost all leading brands of tires, batteries and lubricants that have a presence in Oman are rushing to offer lucrative deals and service packages.

This scenario is not limited to Oman and reflects a regional trend that sees Gulf States producing lubricant oils, batteries brake shoes and air-filters in large numbers. The bulk of such industries are based in Saudi Arabia, Oman and Kuwait. However, car tires are being recycled and not manufactured in this region. As far as metal tires are concerned, Bahrain’s Aluminium Tires Company produces large quantities, all of which are being exported. Overall, the GCC region has been a profitable market for tires, lubricants and batteries. European brands have always dominated the lubricant industry globally with very few originating from Japan and Middle East, like the UAE and Oman.

Similarly, the battery market has also been traditionally dominated by European brands, though of late, supply has also been coming from countries such as Indonesia, South Korea or Saudi Arabia with an indigenous brand from Oman. Unlike lubricants and batteries, Oman has only tire-trading industry as there is no rubber production in the country.

Car sales volumes have also witnesses a dramatic increase over the past couple of years and estimates are that the segment will continue its growth trajectory, further fuelling demand for tires, batteries and lubricants. In the tire segment, the market has a wide range of brands like Michelin, Pirelli, Hankook, Yokohama, Bridgestone, GoodYear, Toyo, Falken, Kumho, Continental, Ceat, etc. But it’s not only car sales that are driving demand for tires. One major driver especially in the desert environs of the GCC is usage and maintenance.

As far as the lubricants market is concerned, the industry has more than 30 international players in the Middle East region. Major players in the Middle East are Shell, BP/Castrol, Mobil, Total, Elf, Caltex, Valvoline, Gulf Oil, ADNOC, Veedol, Crown, ENOC, Fuchs and National. The demand for lubricants has significantly increased in the Sultanate of late due to economic environment, population growth, general level of motorisation and industrialisation. Shell Oman has the largest market share in terms of total production, while Shell Rotella leads the market in the diesel engine oil segment, and BP’s Visco 2000 leads in the petrol engine oil segment.

The three sectors which are the main consumers for lubricants in Oman are commercial and industrial sectors with consumption standing at 60%; the automotive sector consuming about 35% of the lubes; and, the marine sector which makes up 5% of the total lubricants market in Oman. Industry sources observe marked growth for the segment especially in Sohar where widespread development and industrial activity are driving demand for lubricants in the area.

The demand for high performance lubricants to meet the changing trends in automobile technology is very important. New equipment and vehicles are coming out with requirement for synthetic lubricants, which, unlike mineral-based oil, keep the engine parts, gears, etc. in good condition for a longer period of time. When it comes to making a choice in picking up lubricant for their cars, customers in Oman are going for the best.

With the automobile sector on an upward curve for the last few years, the battery market is also experiencing an upswing. The Oman market has traditionally been dominated by European giants. Global big players such as Exide, AC Delco, Yuasa, NBC, FB and Rocket among others have had a firm footing in the Omani market. However, Reem Batteries (Antara) is an indigenous product. In recent years, products from Indonesia (GS and Incoe) and South Korea (Aurora) are also making inroads and are increasing the competition. Consumers also have to be careful as some few players lower prices by introducing low-quality gear. Nevertheless, the global players have an edge over the low-quality products in terms of reach as well range of products. The premium brands enjoy a good distribution network through a network of branches and a dedicated sales force.

The GCC countries boast of one of the highest per capita incomes in the world. The stable economy, a high population growth rate, and the fact that local production of automobiles is almost non-existent, are the key factors behind the significant development of the automotive sector. The diversified automotive industry in the GCC and Oman is highly dependent on imports from Europe, America, Japan, and other Asian countries. The large presence of automobiles in the region creates significant demand for the aftermarket industry.

Using an Agent or Distributor

The market is import-oriented, highly competitive and promotes an 'agent' culture. The success of a product, to a great extent, depends on the agent. As in other Gulf countries, personal contact is the key to success in trade relationships. Major end-users and the Omani Commercial Law encourage vendors to engage a registered local agent. An amendment to the Agency law has removed the requirement for exclusive agents. In special cases, as when the government has directly approached a foreign firm, the agency requirement may be waived altogether.