Table of Contents
1 Project Background 3
2 Caveat: The Impact of COVID-19 4
3 Executive Summary 5
4 The Economy of Saudi Arabia 6
5 Road Transportation Market Overview
a. Market Size and Growth
b. Fleet Size
c. Market Segmentation
d. Growth Drivers
7-10
6 Key Industries Using Road Transport 11
7 Key Industry Analysis 12-16
Project Background
is preparing for an IPO. As part of the process, the firm is developing a corporate strategy, implementing a process-based approach, aligning various departments and undertaking and modernizing / automating exercise. To help
with the development of their corporate strategy, Al-Sudais would like to study the Transportation Sector in Saudi Arabia and to, specifically, identify its fast-growing sectors. A key part of this is understanding the sizes and growth rates
of various segments within the Road Transportation market.This will help the company plan its truck fleet for the next few years.
Caveat: The Impact of COVID-19
The COVID-19 pandemic has already affected several businesses & economies, and its final impact is still to be seen. By necessity, this report makes use of insights, data-points, statistics & forecasts that were published before the pandemic. Source: Fortune 04 The reader must be aware that, according
to a Fortune Magazine survey conducted at the end of April 2020, 85% of Fortune 500 CEOs only expected that the US economy would return back to the pre-pandemic levels only in Q1 2022 or later.The obvious implication is that Covid-19 will also have a significant impact on other parts of the world, to greater or lesser degrees.
Executive Summary
- Saudi Arabia is the largest economy in the Middle East, historically being driven by oil. However, over the last few years, the Government has been focusing on the development of non-oil sectors to achieve its Vision 2030. Transportation is one of the growing sectors in Saudi as movement of goods are required in both oil and non-oil sectors.
- Road is the most-used mode for transportation in the region. The major segments within the Road Transportation industry in Saudi include Full Truck Load (FTL), Less Than Truck Load (LTL), Bulk, Temperature Controlled, and Courier or parcel. Currently, FTL and LTL segments together account for more than half of the Road Freight market.
- The LTL and Temperature Controlled truck segments are expected to grow significantly by 2025 with the emergence of new technologies and increasing demand from online marketplaces driving the growth of the LTL segment. The Temperature
Controlled segment is largely driven by the hot weather, increase in food imports and the growth of the pharmaceutical sector. - The Agriculture / Fisheries and Mining / Quarrying industries contribute to a significant share of the Road Transportation market, given the focus on infrastructure developments by Saudi.
- Growth in industries like FMCG, Retail, Construction, etc., new road development projects and increase in intra-GCC trade are also some of the factors driving the growth of the market. While the COVID-19 crisis has subdued some of these growth drivers, its impact is expected to be temporary. It seems likely that the Saudi Transportation sector is poised for further growth once the pandemic is behind us.
The Economy of Saudi Arabia
Saudi Arabia is the largest oil dependent economy in the Middle East. There are strong government controls over major economic activities. However, Saudi
Arabia has encouraged the growth of the private sector in order to diversify its economy and to employ its own nationals, with officials being especially focused on employing its large youth population. Approximately 6 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors
According to IMF, due to the outbreak of the COVID-19, GDP growth is expected to fall to 2.3% in 2020 and then rise again to 2.9% in 2021 (subject to the postpandemic global economic recovery). The public debt is estimated to grow to 28.4% in 2020 and further increase to 33.6% by 2021.
Source: Nordea Trade, Focus-Economics, The Odora, Heritage, Trading Economics
Road Transportation Market Overview: Size and Growth
The Transportation and Logistics sector in Saudi Arabia is a large and
dynamic industry, strongly supported by state led investment in rail,
maritime, road, logistics and airport infrastructure. Factors driving the
investment in the massive expansion of its transportation networks are:
• Economic growth
• Population maturation
• Rapid urbanization
Saudi uses a variety of different vehicles for transportation, including container
trucks, flat trucks, tankers, pickup trucks, temperature control trucks etc
The market is heavily fragmented, with only a handful of large trucking companies providing services in Saudi Arabia. They compete headto-head with other leading regional and global logistics providers in the Middle East.
Road Transportation Market Overview: Fleet Size
Truck fleets in the Middle East vary substantially in terms of the sizes of the trucks being operated. There are different truck fleets per country, with varying degrees of specialization on the basis of the cargo that they carry, and the geographic scope within which they are active. Some fleets are generalist cargo
transport companies while others specialize in specific sectors or cargo types.
Source: Arthur D Little 08
Road Transportation Market Overview: Major Truck Segment in Saudi
The FTL and LTL segments make up almost half of the total Saudi’s Road Freight market. FTL is the major share at 30% owing to high volume and large ticket size of orders and consignments.
• Emerging technologies are expected to act as a catalyst for the growth of the market FTL segment.
• Saudi is embracing emerging technologies and offer full visibility of freight, thereby transforming LTL to make it more reliable and efficient. Online freight
marketplaces are solving the problems of LTL transport, specifically short hauls.
• Increase in import of food (80% food consumed in Saudi is imported) and growth of Pharmaceuticals is driving the Temperature-Controlled segment.
• Due to Vision 2030, increase in activities in Petrochemical, Automotive, Aerospace and Defence, Cement and Power-Generation industry will boost the Bulk segment.
• Rise of E-commerce and Online shopping is driving the Courier/ Parcel segment.
Source: EIN News, Frost & Sullivan 09
Key Industries Using Road Transport: Automotive
Source: Frost & Sullivan, Oil & Gas Middle East, Market Reports on Saudi, Global Newswire
Source: Global Newswire, Mordor Intelligence, Frost and Sullivan, Techsci Research 14
Source: Frost & Sullivan, Global Newswire, Grandview Research, GMI Research, Forbes Middle East, Business Wire, Research ad Markets, OPEC 15
Source: Frost & Sullivan, Oil & Gas Middle East 16