The Middle East Military Vehicles Market was valued at USD 25.13 billion in 2020 and is projected to reach USD 37.12 billion by 2026, registering a CAGR of about 6.8% during the forecast period, 2021 - 2026.
The military spending of major countries in the region is decreasing. Factors like the fluctuations in oil prices and the impact of the COVID-19 pandemic are affecting the economies of several countries, thereby affecting the growth in military spending. In addition, countries like Saudi Arabia have announced that they will reduce defense spending to allocate more resources to healthcare and social development sectors. Such decisions may impact the growth of the market in the region.
While countries like Saudi Arabia, Israel, and UAE operate modern military vehicles, several countries in the region possess Soviet-era vehicles that require modernization. Hence, these countries are investing in the procurement of new military vehicles.
In addition, the aging fleet of military vehicles is also forcing some countries to invest in upgrade programs to improve the efficiency, lethality, and sophistication of the vehicles if they are slated to be effectively functional for some more years.
Moreover, while the modernization and expansion of the region’s vehicle fleets continue at a healthy pace, the region is also becoming increasingly self-sufficient and independent of the foreign countries by developing their indigenous manufacturing capabilities. Several countries have been developing military vehicles on their own or are partnering with their foreign counterparts and manufacturing vehicles locally with the help of technology transfer agreements.
Key Market Trends Increasing Focus on the Modernization of Naval Vessels Fleet
For several decades, countries in the Middle East have focussed more on maintaining a modernized fleet of armored vehicles. However, with the changing nature of modern warfare, countries have increased their spending on naval vessel procurement over the past decade and have placed orders for newer generation naval combat ships. For instance, in June 2019, the UAE awarded a USD 850 million contract to France’s Naval Group for two Gowind corvettes. The UAE’s 2,700-ton corvettes will be equipped with Naval Group’s SETIS combat management system, MBDA’s Exocet missile, and Raytheon’s Evolved Seasparrow Missile. Additionally, the Gowind corvettes would also feature the Thales Tacticos combat management system. Likewise, in February 2020, Fincantieri launched the first Doha-class air defense corvette ordered by the Qatari Ministry of Defence within the national naval acquisition program. The vessel, scheduled for delivery in 2021, is designed consistent with the RINAMIL rules. The ship is envisioned to be capable of fulfilling a range of tasks, from surveillance with sea rescue capabilities to being a fighting vessel, while also being capable of operating high-speed boats such as RHIB (Rigid Hull Inflatable Boat) through lateral cranes or a hauling ramp located at the far stern. The flight deck and hangar are also sized for hosting one NH90 helicopter.
In recent years, the Middle East countries have also realized their over dependency on foreign manufacturers for military vehicles, which has resulted in few countries investing in indigenous development of military vehicles through partnership with allied nations. Such developments and procurement plans will drive the growth of the naval vessels segment during the forecast period.
Saudi Arabia Accounted for a Major Share (by Revenue) in 2020
In 2020, Saudi Arabia accounted for over 36% market share in the Middle East military vehicles market. Saudi Arabia has reduced its defense spending and budget allocation since 2015, primarily due to downward pressure from declining energy prices and more focus on the education sector. Increasing tensions between Saudi Arabia and Iran and the recent drone attacks on the oil facilities in Saudi Arabia by Yemen’s Houthi rebels have raised concerns about the territorial defensive capability of Saudi Arabia. Due to this, the country initiated a huge project to modernize its armed forces. In 2014, the government of Saudi Arabia selected General Dynamics Land Systems-Canada to supply light-armored vehicles, equipment, training, and support services to the country. The contract is worth USD 10 billion and is planned to run through 2030. However, due to the country’s involvement in the war in Yemen, Canada temporarily ceased the delivery of the armored vehicles to the armed forces of Saudi Arabia in 2018. Later, in April 2020, the governments renegotiated the terms of the contract to recommence the deliveries of light armored vehicles. Later in 2016, Saudi Arabia placed an order for 200 armored vehicles from Renault Trucks Defense. The contract includes 100 VAB Mk3 6x6 APCs and 100 SHERPA Light tactical vehicles.
The government of Saudi Arabia initiated the Saudi Naval Expansion Program II, a naval modernization program spanning a period of more than 10 years. The government plans to spend approximately USD 20 billion on new ships (which may replace the outdated East Naval Fleet) and about USD 6 billion on the frigate program built by Lockheed Martin. Under this initiative, the country ordered Multi Mission Surface Combatant Ships (MMSC). In December 2019, Lockheed Martin was awarded a USD 1.96 billion foreign military sales contract to design and construct four MMSC for the country. The delivery of the naval vessels are anticipated to begin by 2023.
The country is also strengthening its aerial combat capabilities through procurement of advanced fighter jets. In December 2020, the Royal Saudi Air Force (RSAF) officially received its final Boeing F-15SA multirole jet as a part of the USD 29-billion foreign military sales (FMS) agreement signed with Boeing in 2010. Under the FMS agreement, 84 F-15SA aircraft were delivered to the country. In March 2021, Saudi Arabia signed two contracts worth more than USD 150 million with Lockheed Martin Corporation, for UH-60M Black Hawk helicopters. Under one contract, the company received an order for four helicopters from the country, which are expected to be delivered in June 2022 (contract modification to previous contract signed in 2017). Another contract was awarded to deliver 25 modified UH-60M helicopters for the Saudi Arabian National Guard (SANG). The contract is scheduled to be delivered through October 2024. With these two orders, the orderbook for UH-60M helicopters has increased to more than 110. Such procurements will propel the growth of the military vehicles market in Saudi Arabia.
Competitive Landscape The Middle East military vehicles market is majorly dominated by foreign players as of 2020. However, the growing focus toward indigenous manufacturing of military vehicles is anticipated to increase the market share of local players during the forecast period. Countries like Turkey, Saudi Arabia, the UAE are the frontrunners in indigenous manufacturing. Turkey has vastly advanced in armored vehicle manufacturing and is acquiring new vehicles to modernize its fleet. In August 2017, BMC, one of the leading Turkish armored vehicle manufacturers, received a contract from the Turkish government to produce and sell a total of 529 tactical wheeled armored vehicles. Under this contract, BMC was selected as the prime contractor in the program for procurement. The contract was issued under the Tactical Wheeled Vehicles-2 (TTA2) program. Also recently, BMC reached an agreement with two South Korean companies to work on the power pack of its new generation Altay tank. In recent years, Turkey has also improved its indigenous ship manufacturing capability, which has been fueled by the sanctions imposed by the United States. Companies like Aselsan, TAI, IAI, BMC, and NIMR are some of the prominent local players that have grown significantly globally over the past years. Foreign players in order to stay competitive in the Middle East market are partnering with local players and are establishing local manufacturing capabilities.
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