June 24 will be marked as a historic day for Saudi Arabia, as women will finally be able to legally drive in the country.
The move is hailed as a success story for the Kingdom as it ploughs its way into an open society as part of Crown Prince Mohammad Bin Salman’s reformatory Vision 2030 plan.
But could the decision have disastrous effects?
A new page
Starting Monday, June 4, Saudi Arabia began distributing the first batch of driving licenses to its female citizens, as the official Saudi Press Agency reports. Ten licenses were issued so far, and most of those who were awarded driving permits had already held similar licenses abroad.
The Associated Press (AP) reports that many of the Kingdom’s women have been attending driving lessons at female-only college campuses, in anticipation of the historic date.
With such a large portion of the population about to drive for the first time, what are the widespread effects on the country as a whole?
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Problems on the horizon
What is about to occur in Saudi Arabia has likely not happened before anywhere else in the world. The Financial Times reports, “when the website for Saudi’s first driving school for women opened for online registration [in February], it attracted more than 165,000 applicants in just three days.”
According to a survey in 2017 by YouGov, 80% of Saudi women interviewed wanted to get their license and drive. That’s approximately 9 million women who are about to or interested to begin driving. This huge influx of citizens entering the driving and automobile sector will have a massive impact on several of the country’s sectors and industries.
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The bigger picture
The greatest winners to come out of this entire situation are automobile companies. The incoming surge of demand for vehicles is about to shoot through the roof. These companies have already launched several campaigns to capitalize on this change. Ford, Volkswagen and others have been quick to snare potential female buyers with promotions, campaigns and others strategies to hopefully kick-start some long-lasting brand loyalty.
A report by PWC Middle East released in March shows that car sales are expected to grow by 9% per annum until 2025. The annual growth rate for car leasing is also expected to increase significantly with an annual growth rate of 4% over 2017-2025.
The motor insurance sector in Saudi is another winner. This market is expected to grow by 9% annually between 2017-2020, arriving at a value of $8 billion. Given that most of these women have never driven before, insurance rates are bound to be inflated as the risk of vehicular accidents will be quite high. UK-based insurance broker firm ALA found that 21.6% of new drivers have an accident in their first year on the road. Moreover, they discovered that new drivers are often charged with the highest insurance premiums, in comparison with more experienced drivers.
Saudi women can expect a similar situation in the country.
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An influx of new drivers means a greater increase in traffic density. With almost half the population about to be granted access to the Kingdom’s roads, traffic rates are inevitably going to be impacted.
Traffic will also have some impact on businesses and their performance. In the UK for example, the Tomtom Traffic Index found that almost $1.2 billion is wasted by drivers stuck in traffic per year. This also adds up to 16 working days that businesses are practically losing.
To alleviate the incoming surge in traffic, the Saudi government could look into commissioning new roads and routes, which would prove a boon to contractors.
However, Google Maps and other GPS services won’t be enough to help Saudi’s new drivers traverse the roads once construction projects kick in. Reroutes and detours do not register very accurately on these apps, and this in turn will lead to congestion and chaos as women try to navigate the urban landscape for the first time. With the infrastructure Intelligence Center tracking 111 infrastructure construction projects in min-2017, the addition of new road projects will only lead to more headaches.
One market that will definitely suffer the fallout from the new decree is the taxi industry. Up until now, Saudi women have relied on male relatives, taxi drivers and chauffeurs to drive them around. With women finally taking the reins, the taxi industry is about to be hit hard. However, the more forward-thinking taxi services such as Careem have already figured an appropriate strategy to combat this. By February, they had effectively signed up more than 1,000 female drivers. This will no doubt lead to a better brand image in the region, as Careem dons a more liberal outlook to the public. The ride-hailing company revealed that up to 70% of the app’s users in the Kingdom are in fact women, so evolving to meet the market’s new needs will be vital to prevent losses.
Permitting female citizens in Saudi to finally be able to drive will help bring the country into the 21st century, yet this massive change will have widespread repercussions that will reverberate throughout the nation. It is up to the Saudi government to make sure this new law will transition as smoothly as possible.
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Source: Press Release