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Autoparts

 

 

Investment Opportunities in the Automotive Industry

 


Several factors combine to make Saudi Arabia an attractive market for automotive spare parts. With a population of 18 million, the Kingdom's total vehicle population is estimated at 6.5 million, one of the highest figures in the Middle East. The last two years have seen sales of new motor vehicles in Saudi Arabia declining, while sales of second-hand cars have increased considerably. These older, used vehicles will require more scheduled and regular maintenance in coming years than newer models. Harsh weather conditions, a dependence on road transport, and a lack of routine preventive maintenance also positively affect the demand for automotive spare parts in the Kingdom. The U.S. Department of Commerce estimates that Saudi Arabia's total market size for spare parts at $550 million for 1997, of which $515 will be imported.

The Saudi Consulting House (SCH) has identified investment opportunities in the spare parts industry, divided into 14 groups: automotive pumps, radiators, engines, brakes, suspension systems, electrical parts, front and rear lights, spark plugs, positive and negative cables, air conditioners, exhaust systems, front and rear bumpers, windshields, tires and tubes.


Automotive Pumps

Annual Production Capacity:

Description Units
Fuel Pump 150,000
Oil pump 150,000
Water pump 150,000
Steering wheel oil pump 150,000

Total Capital Costs:

Description SR
Fixed capital 20,340,000
Depreciation 6,751,000
Total 27,091,000

Financing Sources:

Description SR
Equity (25%) 6,772,750
Long Term Loans (50%) 13,545,500
Short Term Loans (25%) 6,772,750
Total 27,091,000

Annual Operation Costs:

Description SR
Fixed costs 3,524,000
Variable costs 27,394,000
Total 30,918,000

Financial and Economic Indices:

Description SR
Annual Revenues 36,000,000
Total operation 30,918,000
Gross profit before Zakat & financial expenses 5,082,000
Financial expenses 254,000
Profit after financial expenses 4,828,000
Zakat 289,000
Net profit 4,539,000
Internal rate of return 40.75%
Rate of return on equity 61.8%
Simple rate of return on investment 25.9%
Break-even point on full capacity 43.9%
Pay-back period 3 years, 10 months

 


Radiators

Annual Production Capacity:

Description Units
Radiator 72,000
Radiator fans 180,000
Radiator connections & hoses 600,000

Total Capital Costs:

Description SR
Fixed capital 17,960,000
Depreciation 6,827,000
Total 24,787,000

Financing Sources:

Description SR
Equity (25%) 6,196,750
Long Term Loans (50%) 12,393,500
Short Term Loans (25%) 6,196,750
Total 24,787,000

Annual Operation Costs:

Description SR
Fixed costs 3,297,000
Variable costs 27,734,000
Total 31,031,000

Financial and Economic Indices:

Description SR
Annual Revenues 36,060,000
Total operation cost 31,031,000
Gross profit before Zakat & financial expenses 5,029,000
Financial expenses 232,000
Profit after financial expenses 4,797,000
Zakat 291,000
Net profit 4,506,000
Internal rate of return 43.9%
Rate of return on equity 67.0%
Simple rate of return on investment 27.3%
Break-even point on full capacity 42.4%
Pay-back period 3 years, 7 months

Automotive Engines

Annual Production Capacity:

Description Units
Engine Block 120,000
Cylinder head 120,000
Valves & Accessories (sets) 195,000
Steering wheel oil pumps (sets) 160,000

 Total Capital Costs:

Description SR
Fixed capital 440,400,000
Depreciation 49,833,000
Total 490,233,000

Financing Sources:

Description SR
Equity (25%) 122,558,250
Long Term Loans (50%) 245,116,500
Short Term Loans (25%) 122,558,250
Total 490,233,000

Annual Operation Costs:

Description SR
Fixed costs 58,625,000
Variable costs 203,079,000
Total 261,704,000

Financial and Economic Indices:

Description SR
Annual Revenues 351,100,000
Total operation 261,704,000
Gross profit before Zakat & financial expenses 89,396,000
Financial expenses 4,596,000
Profit after financial expenses 84,800,000
Zakat 3,366,000
Net profit 81,434,000
Internal rate of return 44.9%
Rate of return on equity 60.4%
Simple rate of return on investment 24.6%
Break-even point on full capacity 42.7%
Pay-back period 3 years,8 months

Braking Group

Annual Production Capacity:

Description Units
Master brake cylinder 270,000
Braking system connections 300,000

 Total Capital Costs:

Description SR
Fixed capital 42,923,000
Depreciation 10,745,000
Total 53,668,000

Financing Sources:

Description SR
Equity (25%) 13,417,000
Long Term Loans (50%) 26,834,000
Short Term Loans (25%) 13,417,000
Total 53,668,000

Annual Production Costs:

Description SR
Fixed costs 7,090,000
Variable costs 43,390,000
Total 50,480,000

Financial and Economic Indices:

Description SR
Annual Revenues 61,200,000
Total operation 50,480,000
Gross profit before Zakat & financial expenses 10,720,000
Financial expenses 503,000
Profit after financial expenses 10,217,000
Zakat 524,000
Net profit 9,693,000
Internal rate of return 45.1%
Rate of return on equity 65.3%
Simple rate of return on investment 26.4%
Break-even point on full capacity 42.6%
Pay-back period 3 years,7 months

Suspension System

Annual Production Capacity:

Description Units
Front and rear suspension axles 90,000
Tie rod end 360,000
Upper and lower suspension arms 400,000
Shock absorbers 60,000

Total Capital Costs:

Description SR
Fixed capital 230,113,000
Working Capital 25,049,000
Total 255,162,000

Financing Sources:

Description SR
Equity (25%) 63,790,500
Long Term Loans (50%) 127,581,000
Short Term Loans (25%) 63,790,000
Total 255,162,000

Annual Production Costs:

Description SR
Fixed costs 31,527,000
Variable costs 101,532,000
Total 133,059,000

Financial and Economic Indices:

Description SR
Annual Revenues 183,400,000
Total operation 133,059,000
Gross profit before Zakat & financial expenses 50,341,000
Financial expenses 1,993,000
Profit after financial expenses 48,348,000
Zakat 1,835,000
Net profit 46,513,000
Internal rate of return 42.6%
Rate of return on equity 61.5%
Simple rate of return on investment 25%
Break-even point on full capacity 40.9%
Pay-back period 3 years,8 months

Electrical Parts Group

Annual Production Capacity:

Description Units
Switches 480,000
Distributors 150,000
Cutouts 240,000
Contact breakers 2,000,000
Condensers 300,000

Total Capital Costs:

Description SR
Fixed capital 144,230,000
Working Capital 14,193,000
Total 158,423,000

Financing Sources:

Description SR
Equity (25%) 39,605,750
Long Term Loans (50%) 79,211,500
Short Term Loans (25%) 39,605,750
Total 158,423,000

Annual Production Costs:

Description SR
Fixed costs 20,530,000
Variable costs 56,734,000
Total 77,264,000

Financial and Economic Indices:

Description SR
Annual Revenues 112,300,000
Total operation 77,264,000
Gross profit before Zakat & financial expenses 35,036,000
Financial expenses 1,238,000
Profit after financial expenses 33,789,000
Zakat 1,200,000
Net profit 32,598,000
Internal rate of return 47.79%
Rate of return on equity 69.5%
Simple rate of return on investment 27%
Break-even point on full capacity 39.2%
Pay-back period 3 years, 5 months

Front and Rear Lights

Annual Production Capacity: 480,000 units

Total Capital Costs:

Description SR
Fixed capital 28,532,000
Working Capital 8,259,000
Total 36,791,000

Financing Sources:

Description SR
Equity (25%) 9,197,750
Long Term Loans (50%) 18,395,500
Short Term Loans (25%) 9,197,750
Total 36,791,000

Annual Operation Costs:

Description SR
Fixed costs 5,435,000
Variable costs 33,004,000
Total 38,439,000

Financial and Economic Indices:

Description SR
Annual Revenues 48,000,000
Total operation 38,439,000
Gross profit before Zakat & financial expenses 9,561,000
Financial expenses 345,000
Profit after financial expenses 9,216,000
Zakat 437,000
Net profit 8,779,000
Internal rate of return 58.4%
Rate of return on equity 86.7%
Simple rate of return on investment 31.7%
Break-even point on full capacity 38.5%
Pay-back period 3 years

Spark Plugs (1)

Annual Production Capacity: 3,000,000 units

Total Capital Costs:

Description SR
Fixed capital 13,099,000
Working Capital 1,467,000
Total 14,566,000

Financing Sources:

Description SR
Equity (25%) 3,641,500
Long Term Loans (50%) 7,283,000
Short Term Loans (25%) 3,641,500
Total 14,566,000

Annual Operation Costs:

Description SR
Fixed costs 2,383,000
Variable costs 5,398,000
Total 7,781,000

Financial and Economic Indices:

Description SR
Annual Revenues 10,500,000
Total operation 7,781,000
Gross profit before Zakat & financial expenses 2,719,000
Financial expenses 137,000
Profit after financial expenses 2,582,000
Zakat 101,000
Net profit 2,481,000
Internal rate of return 44.46%
Rate of return on equity 62.2%
Simple rate of return on investment 25.4%
Break-even point on full capacity 49.4%
Pay-back period 3 years, 7 months

Spark Plugs (2)

Production Capacity:

Spark Plugs -- 3,000,000 units

Total Investment Required:  $4,000,000

Contact:  Mr. Nasser Mohammed Al-Humaid, Spark Plugs Manufacturing, P.O. Box 41418, Riyadh 11521, Saudi Arabia  Phone:  966-1-448-0275/448-0304  Fax:   966-1-448-0683

Source: Saudi Consulting House


Oil Filters

Description  
Capacity

7,000 units/year

Invested Capital SR 2.623 million
Capital Recovery Period 4 years from production commencement date
Annual Sales SR 3,850,000

Source: Saudi Basic Industries Corporation


Pick-Up Truck Covers

Manufacturing Method:  Circulatory Molding

Description  
Capacity

4,830 covers

Invested Capital SR 7.4 million
Return on Invested Capital 26.4%
Capital Recovery Period 2.8 years from production commencement date
Annual Sales SR 4,830,000

Funding:   25 % self-funding
                  25 % commercial loans
                  50 % government loan 

Source: Saudi Basic Industries Corporation


Positive and Negative Cables

Annual Production Capacity: 240,000 units

Total Capital Costs:

Description SR
Fixed capital 2,600,000
Working Capital 693,000
Total 3,293,000

Financing Sources:

Description SR
Equity (25%) 823,250
Long Term Loans (50%) 1,646,500
Short Term Loans (25%) 823,500
Total 3,293,000

Annual Operation Costs:

Description SR
Fixed costs 961,000
Variable costs 2,100,000
Total 3,061,000

Financial and Economic Indices:

Description SR
Annual Revenues 3,600,000
Total operation 3,061,000
Gross profit before Zakat & financial expenses 539,000
Financial expenses 31,000
Profit after financial expenses 508,000
Zakat 30,000
Net profit 478,000
Internal rate of return 30%
Rate of return on equity 49.3%
Simple rate of return on investment 22.4%
Break-even point on full capacity 66.1%
Pay-back period 4 years, 1 month

Car Air-Conditioners

Annual Production Capacity: 30,000 units

Total Capital Costs:

Description SR
Fixed capital 18,804,000
Depreciation 5,135,000
Total 23,939,000

Financing Sources:

Description SR
Equity (25%) 5,984,750
Long Term Loans (50%) 11,969,500
Short Term Loans (25%) 5,984,750
Total 23,939,000

Annual Production Costs:

Description SR
Fixed costs 3,437,000
Variable costs 20,443,000
Total 23,880,000

Financial and Economic Indices:

Description SR
Annual Revenues 28,500,000
Total operation 23,880,000
Gross profit before Zakat & financial expenses 4,620,000
Financial expenses 224,000
Profit after financial expenses 4,396,000
Zakat 238,000
Net profit 4,158,000
Internal rate of return 43.5%
Rate of return on equity 63.2%
Simple rate of return on investment 26%
Break-even point on full capacity 45.4%
Pay-back period 3 years, 8 months

Exhaust System

Annual Production Capacity: 90,000 units

Total Capital Costs:

Description SR
Fixed capital 12,278,000
Working Capital 2,989,000
Total 15,267,000

Financing Sources:

Description SR
Equity (25%) 3,816,750
Long Term Loans (50%) 7,633,500
Short Term Loans (25%) 3,816,750
Total 15,267,000

Annual Operation Costs:

Description SR
Fixed costs 2,285,000
Variable costs 10,976,000
Total 13,261,000

Financial and Economic Indices:

Description SR
Annual Revenues 16,200,000
Total operation 13,261,000
Gross profit before Zakat & financial expenses 2,939,000
Financial expenses 143,000
Profit after financial expenses 2,796,000
Zakat 145,000
Net profit 2,651,000
Internal rate of return 43%
Rate of return on equity 63.3%
Simple rate of return on investment 26%
Break-even point on full capacity 46.5%
Pay-back period 3 years, 8 months

Front and Rear Bumpers

Annual Production Capacity: 30,000 units

Total Capital Costs:

Description SR
Fixed capital 7,749,000
Working Capital 1,508,000
Total 9,257,000

Financing Sources:

Description SR
Equity (25%) 2,314,250
Long Term Loans (50%) 4,628,500
Short Term Loans (25%) 2,314,250
Total 9,257,000

Annual Production Costs:

Description SR
Fixed costs 1,684,000
Variable costs 5,190,000
Total 6,874,000

Financial and Economic Indices:

Description SR
Annual Revenues 8,400,000
Total operation 6,874,000
Gross profit before Zakat & financial expenses 1,526,000
Financial expenses 87,000
Profit after financial expenses 1,439,000
Zakat 74,000
Net profit 1,365,000
Internal rate of return 36%
Rate of return on equity 53.8%
Simple rate of return on investment 23.6%
Break-even point on full capacity 55.2%
Pay-back period 4 years, 1 month

Tires

Production Capacity:

Tires -- 240,000 units

Total Investment Required:  $6,200,000

Contact:  Mr. Saleh T. Al-Raddani, Tire Producing Factory, P.O. Box 126, Tabuk   Saudi Arabia  Phone:  966-4-422-5948  Fax:  966-4-422-0116

Source: Saudi Consulting House


Windshields

Annual Production Capacity: 90,000 square meters

Total Capital Costs:

Description SR
Fixed capital 8,333,000
Working Capital 1,699,000
Total 10,032,000

Financing Sources:

Description SR
Equity (25%) 2,508,000
Long Term Loans (50%) 5,016,000
Short Term Loans (25%) 2,508,000
Total 10,032,000

Annual Production Costs:

Description SR
Fixed costs 1,877,000
Variable costs 5,784,000
Total 7,661,000

Financial and Economic Indices:

Description SR
Annual Revenues 9,056,000
Total operation 7,661,000
Gross profit before Zakat & financial expenses 1,395,000
Financial expenses 94,000
Profit after financial expenses 1,301,000
Zakat 75,000
Net profit 1,226,000
Internal rate of return 30.2%
Rate of return on equity 44.4%
Simple rate of return on investment 20.7%
Break-even point on full capacity 60.2%
Pay-back period 4 years, 8 months

Tires and Tubes

Annual Production Capacity: 240,000 tires and 240,000 tubes

Total Capital Costs:

Description SR
Fixed capital 18,640,000
Working Capital 5,082,000
Total 23,722,000

Financing Sources:

Description SR
Equity (25%) 5,930,500
Long Term Loans (50%) 11,861,000
Short Term Loans (25%) 5,930,000
Total 23,722,000

Annual Production Costs:

Description SR
Fixed costs 3,435,000
Variable costs 20,244,000
Total 23,679,000

Financial and Economic Indices:

Description SR
Annual Revenues 28,320,000
Total operation 23,679,000
Gross profit before Zakat & financial expenses 4,641,000
Financial expenses 222,000
Profit after financial expenses 4,419,000
Zakat 238,000
Net profit 4,181,000
Internal rate of return 42.8%
Rate of return on equity 64.1%
Simple rate of return on investment 26.4%
Break-even point on full capacity 45.3%
Pay-back period 3 years, 8 months

Exchange Rate: US$1 = SR3.75

For more information about these opportunities, contact Saudi-Business-Center@The-Saudi.Net

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