Saudi King gives away $32B

Saudi’s will buy 300,000 cars in the next 30 days!

Automakers and car dealers in Saudi Arabia and the United Arab Emirates will most likely run out of stock in the next 30 to 60 days - a happy problem, but a problem nevertheless.

While not uncommon, the auto industry in Saudi Arabia and United Arab Emirates did not see this coming this year. The newly installed monarch of Saudi Arabia, HRH King Salman bin Abdulaziz, gave away post-coronation dole-outs and bonuses to its citizens amounting to US$32 billion (bigger than the annual budget of Nigeria, Africa’s largest economy). While European leaders and US Congress are implementing austerity measures, this new king, in a nation awash with cash having US$700 billion in foreign reserves, is overflowing with generosity—or should we call it a part of a “welfare economy, where loyalty to nation and its leaders is primarily influenced by the amount of dole-outs its citizens receive”.

You can imagine how happy the 3 million government workers (of 5.5 million total workforce) in the kingdom are after receiving a surprise 2-month salary bonus amounting to an average of US$10,000 each. Aside from salary bonuses, the king gave money to professional associations, literary and sports clubs, educational foundations and social causes (and thank God, none to support terrorists organisations).

With this unexpected money, the Saudi’s said, “We will use this to pay debts, buy jewellery, travel abroad” and at least 20% of them said, “We will buy cars”. That is a staggering US$6.4 billion for purchase (by cash or installments) of cars. That means 300,000 cars will be sold in Saudi Arabia (more than the total car sales in the Philippines) and the neighbouring UAE (the favourite weekend vacation haven of the Saudi’s).

With this, automakers and car dealers will clear their warehouses of their inventories soon and this will disrupt their stock scheduling to a major degree—still a happy problem.

Now the real problem comes. With the SUV-clogged streets of Saudi Arabia, owing to very cheap subsidized fuel of 45 cents a gallon (about 80% cheaper than fuel prices in other countries), one would wonder where they would drive the 300,000 more new cars? Watch out for a lot of secondhand cars exported out from Saudi to countries like Cambodia, Nigeria, Senegal and the Philippines!