Saudi Arabia’s decision to lift its driving ban on women is not only good news for the struggle for gender equality. It will also be welcomed by carmakers and financial institutions operating in the Saudi automotive market.

While the removal of the ban will have a wide impact on Saudi Arabia’s economic and business landscape in general, the automotive sector in particular is set to receive a boost, according to a new analysis by IHS Markit. The market intelligence company predicts the changes will add 60,000 automotive units per year (translating into an increase of 5-7%) to the market’s potential over the forecast horizon from 2019 to 2030.

The analysis comes after Saudi King Salman bin Abdulaziz Al Saud issued a royal decree on September 26 allowing women to drive from June 2018. A committee has now been set up to study the issue, and is due to advise the government within 30 days on how to enforce the order.

The nine months before the decree takes effect will be used to develop “the infrastructure and institutional capacity, such as expanded licensing facilities and driver education programmes, to accommodate millions of new drivers”, according to a statement by the Saudi Arabian embassy in the US.

IHS Markit calls the king’s order “an excellent opportunity for the automotive sector” as it will likely “release fresh demand”, effectively opening up an entirely new market and giving it a boost in the short and long term.

According to Emmanuel Darku, an analyst at IHS Markit, the impact will likely be felt annually from 2019, when the first women begin to receive their driver’s licenses.

Speaking to GTR, he says he has had a lot of interest from various carmakers who are now looking to expand their supplies to the Saudi Arabian market, including introducing initiatives to get more people in their showrooms. Most companies, he adds, will however wait for the final government decision before announcing expansion plans.

“Toyota, Hyundai, Nissan, General Motors: these are the major ones that will gain a lot from this decision, and also the premium brands will see some kind of growth,” he says.

But the changes are also seen as an opportunity by new players to enter the country, especially from China. As a result, Darku expects to see more competition in the market going forward.

“At lot of Chinese OEMs (original equipment manufacturers) would be interested in expanding their supply in the country, as they are now doing. For example, GAC are operating in Qatar and Bahrain, so I think they will also be moving in next year,” he says.

Darku also expects to see a growth in the re-export of cars to the Greater Arab Free Trade Area, as well as the in the vehicles financing services and trade finance to support the growing automotive trade.

The government announcement comes at a convenient time for a Saudi vehicle market that has struggled in recent years. In 2016, light-vehicle sales declined by 12.2% to 706,100 units, and IHS Markit’s forecast predicts a further decline to 610,000 units in 2017.

The high cost of living, a reduction in government subsidies, low oil prices and declining consumer confidence are mentioned as some of the key factors behind this slump in automotive sales.

The removal of the driving ban, along with an improvement in medium-term oil prices, could lift the kingdom’s light-vehicle sales to more than 850,000 units by 2021/22.

IHS Markit notes that while new vehicle sales will be boosted, the growth is “likely to be less than what might be expected on first sight”.

The female population in Saudi Arabia is estimated at around 14 million, but the addressable market for automakers is limited to 6.5 million women in the age of 20-49 years. A large part of this potential demand is already met by private drivers, taxis and services such as Uber and Careem.

Added to this comes the fact that many families already own more than one car and therefore don’t need an additional vehicle.

The net impact on sales will thus only be around 1.6 million additional vehicles. IHS Markit also expects “at least a mild shock to the country’s GDP from job losses in these areas and the resulting reverse migration of drivers from the kingdom”.

According to data available from the company, C and D-segment cars were the most popular vehicle categories with Saudi buyers in 2016, accounting for respectively 26.1% and 19.6% of total light-vehicle sales in the country. C-segment pick-ups were another popular category with a market share of 11.5%, followed by E and D-segment SUVs, which accounted for 9.3% and 7.7%, respectively.