Market Scenario 

Israel automotive retail market was valued at US$ 8.57 billion in 2023 and is projected to hit the market valuation of US$ 31.94 billion by 2032 at a CAGR of 15.74% during the forecast period 2024–2032.

As of 2023, Israel's automotive retail industry has been on a growth trajectory supported by economic stability and rising consumer demand, with annual vehicle sales reaching approximately 270,000 units. The market's growth is bolstered by a GDP per capita exceeding $43,000 in 2022, indicating strong purchasing power among consumers. However, the ongoing conflict with neighboring countries, including Iran, Lebanon, and Palestine, presents significant challenges. The war, which began in October 2023, has led to a nearly 20% economic contraction in the last quarter of the year. This downturn prompted Moody’s to downgrade Israel’s sovereign rating from A1 to A2, reflecting concerns over prolonged economic impacts, which could undermine consumer confidence and vehicle sales.

The conflict has triggered an 88% surge in government spending compared to the previous quarter, raising concerns about inflation risks, particularly if regional tensions disrupt oil supplies. Geopolitical risk premiums in the automotive retail market could drive up energy costs, further straining consumer spending on non-essential items like automobiles. Moreover, attacks on shipping lanes in the Red Sea have exposed vulnerabilities in global trade, resulting in delivery delays and increased shipping costs. Given that Israel’s automotive market is primarily import-driven, such disruptions could impact the availability and pricing of vehicles, challenging the dominance of international brands.

Tourism, a key driver of the automotive retail market, has seen visitor numbers plummet by about 80% from the previous year due to the conflict, leading to reduced demand for rental vehicles. While the tech sector has remained resilient, benefiting from military contracts, other industries like construction have nearly halted. This uneven economic impact might influence corporate fleet expansions and private consumer purchases, as businesses and individuals reassess financial priorities amidst uncertainty. The economic shrinkage and sector-specific impacts highlight the broader challenges facing Israel's automotive market.

In the long term, heightened geopolitical risks and market volatility could affect investor sentiment and economic stability, further influencing consumer behavior. However, Israel's innovative start-up ecosystem may find opportunities in increased demand for advanced equipment and leasing services. The focus on electric vehicles and sustainability continues to offer growth potential, although these avenues must be navigated carefully amid regional geopolitical instability. Stakeholders in the automotive industry must adapt strategies to sustain growth in this complex environment. 

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Market Dynamics 

Economic Growth and Rising Disposable Incomes Fueling Vehicle Purchases

Israel's economic dynamism in 2023 is a pivotal factor driving the nation's automotive retail market. With a GDP reaching approximately $564 billion in 2023 and a GDP per capita exceeding $58,270, the country reflects a prosperous landscape for its 9.3 million residents. Low unemployment rates, maintained at around 4%, have significantly bolstered consumer confidence and increased disposable incomes among the populace. These favorable financial conditions have translated into robust vehicle purchases, with new car registrations projected to hit 270,000 units in 2023. This growth is further amplified by an influx of over 4 million tourists annually, contributing to the demand for rental vehicles, which saw acquisitions of over 30,000 new units.

The high-tech sector, a cornerstone of Israel's economy and automotive retail market, employs over 300,000 individuals, offering salaries significantly above the national average and thereby enhancing purchasing power. This has led to a notable rise in demand for both standard and luxury vehicles, with luxury car sales reaching over 10,000 units in 2023. The automotive financing landscape has also been conducive, with automotive loans totaling over 20 billion shekels, making vehicle ownership more accessible. Additionally, the government's supportive fiscal policies and stable economic environment have further cemented consumer confidence, enabling more citizens to consider purchasing vehicles, both new and used.

In conjunction with these factors, favorable credit conditions have played a crucial role in supporting automotive retail market growth. This financial accessibility, coupled with the thriving high-tech industry, has not only amplified vehicle sales but also diversified consumer preferences towards more technologically advanced vehicles. The automotive market's expansion is a testament to Israel's robust economic framework, reflecting the synergy between economic growth, consumer confidence, and an adaptable automotive industry. As vehicle purchases continue to rise, the automotive sector remains a vital indicator of Israel's economic health and consumer optimism, poised for sustained growth in the coming years.
Trend: Rapid Growth of Mobility-as-a-Service and Car-Sharing Models in Israel's 2023 Automotive Market

Israel automotive retail market is experiencing a significant surge in Mobility-as-a-Service (MaaS) adoption, with car-sharing services becoming increasingly popular. The number of car-sharing vehicles has expanded to over 4,000 units nationwide. Leading providers like Car2Go have increased their fleets to 2,000 vehicles, while AutoTel operates 1,500 vehicles across major cities like Tel Aviv and Jerusalem. User registration for these services has surpassed 200,000 active users this year. The demand is fueled by urban residents seeking flexible transportation options; with Israel's urban population reaching 7 million out of 9.3 million, the need for convenient mobility solutions is evident.

The government's support plays a pivotal role in this trend. In 2023, the Ministry of Transport allocated 120 million shekels toward MaaS initiatives, aiming to reduce traffic congestion and environmental impact. Municipalities in the automotive retail market have designated over 3,000 parking spots exclusively for car-sharing vehicles. Environmental benefits are recognized, as each shared car is estimated to replace up to 13 private vehicles on the road. Technological advancements facilitate this growth, with over 6 million car-sharing trips recorded through mobile applications in 2023. The integration of electric vehicles (EVs) into car-sharing fleets is also notable, with more than 600 EVs now available, contributing to lower emissions and promoting sustainable transportation.

Corporate involvement is expanding the MaaS landscape. Companies like Shlomo Sixt have introduced corporate car-sharing programs, providing 700 vehicles tailored for business needs. Ride-hailing services such as Gett have expanded their offerings, completing over 35 million rides in 2023. Israel Railways has partnered with car-sharing companies to offer seamless last-mile connectivity to over 80,000 daily commuters. Investment in MaaS technology startups has attracted over $250 million in funding during the first three quarters of 2023. This rapid growth signifies a transformative shift in Israel's automotive market, emphasizing efficiency, sustainability, and the integration of innovative mobility solutions.

Challenge: High Vehicle Import Taxes Escalate Car Prices in Israel’s 2023 Automotive Market

In 2023, high vehicle import taxes continue to pose a significant challenge in Israel automotive retail market, leading to some of the highest car prices globally. The cumulative taxes on imported cars can add as much as 100,000 shekels to the base price of a mid-range vehicle. For example, a family sedan with a factory cost of 90,000 shekels may retail at over 190,000 shekels after taxes. Luxury vehicles face even steeper increases; a Mercedes-Benz E-Class with a base cost of 220,000 shekels can end up costing buyers more than 450,000 shekels. These substantial tax-induced price hikes make new car ownership less accessible for many consumers.

The impact of these high taxes is evident in market dynamics. New car sales are projected to reach 240,000 units by the end of 2023, showing stagnation due to affordability issues. In contrast, the used automotive retail market is thriving, with over 850,000 transactions expected this year as consumers seek more affordable alternatives. Leasing companies report an increase in demand, signing over 110,000 new contracts in 2023, as individuals opt for leasing over purchasing. The high costs also influence the average age of vehicles on the road, which has risen to 7.5 years, indicating that consumers are holding onto older cars longer instead of buying new ones.

The automotive industry is urging the government to reconsider taxation policies. Industry experts predict that reducing import taxes could boost new car sales by an additional 60,000 units annually, stimulating economic growth and modernizing the nation’s vehicle fleet. However, the government faces a dilemma, as vehicle import taxes generate substantial revenue, estimated at 27 billion shekels in 2023. This revenue accounts for a significant portion of the national budget, complicating efforts to implement tax reforms. Despite this challenge, there is ongoing dialogue between industry stakeholders and policymakers to find a balance that could lower car prices without severely impacting government finances.

Segmental Analysis 

By Service Type 

In Israel's automotive retail market landscape, dealerships reign supreme, with over 88.17% market share outshining online platforms through a blend of personalized service and deep-rooted consumer trust. With more than 400 authorized car dealerships scattered nationwide, Israeli buyers relish the tangible experience of inspecting vehicles firsthand, taking test drives, and benefiting from immediate support from knowledgeable sales teams. This direct interaction is a vital component that online platforms struggle to emulate. Moreover, dealerships offer a comprehensive suite of services beyond the initial sale, including financing, insurance, and after-sales support. These services create a one-stop-shop that simplifies complex automotive purchases, from managing regulatory compliance to facilitating vehicle registration.

The intricacies of Israeli automotive retail market regulations further amplify the indispensability of dealerships. They adeptly navigate import duties, taxes, and safety standards, ensuring all purchases comply with legal requirements. This expertise instills a sense of security in consumers who might find these processes daunting. Additionally, cultural preferences in Israel favor face-to-face transactions for significant purchases like cars, reinforcing the reputation and trust established by dealerships over the years. Exclusive agreements with manufacturers ensure authenticity and provide access to the latest models, a crucial factor for many buyers. Despite the presence of online automotive platforms, concerns over transparency and reliability, along with the inability to offer hands-on experiences, hinder their popularity.

By Coverage

The new cars segment is a powerhouse in Israel's automotive retail market, driven by a strong appetite for the latest models and cutting-edge technologies. The new car segment held over 58.85% market share. Sales figures consistently surpass 270,000 new vehicles annually, spurred by advancements in automotive technology, enhanced safety features, and improved fuel efficiency. Consumers are willing to invest in new vehicles that promise innovation and come with manufacturer warranties, making this segment a significant revenue generator. The robust Israeli economy boosts purchasing power, while the prestige associated with new car ownership further fuels demand.

Government initiatives promoting eco-friendly vehicles through tax reductions and subsidies bolster this trend in the Israel automotive retail market, encouraging consumers to opt for hybrids and electric cars. The expansion of electric charging infrastructure across the country supports this shift, ensuring that the demand for new, energy-efficient models continues to grow. Automotive manufacturers and dealerships play a pivotal role by offering attractive financing packages and comprehensive after-sales services, which further entice buyers. As technological advancements, such as autonomous driving and enhanced connectivity, continue to evolve, the new car segment is poised to maintain its dominance, driven by growing environmental awareness and supportive government policies.

By End Users

Individual consumers dominate Israel's automotive retail market with over 83.81% revenue share, eclipsing fleet operators due to the high societal value placed on personal vehicle ownership. For a population of around 9 million, millions of private vehicles reflect the cultural emphasis on freedom, convenience, and social status associated with owning a car. The need for personal mobility solutions, driven by a well-developed road infrastructure and limited public transportation options, makes private cars indispensable for many Israelis. Daily commutes, family transportation needs, and a strong cultural inclination toward car ownership further cement this trend.

Fleet operators face deterrents in purchasing large volumes of vehicles due to significant operational costs, including maintenance, insurance, and taxes. The rise of ride-sharing and car-sharing services also diminishes corporate reliance on company-owned fleets. Meanwhile, individual buyers benefit from accessible financing options, competitive interest rates, and flexible loan terms offered by banks and dealerships. For instance, car loans with repayment periods extending up to seven years make ownership more attainable. Government incentives also play a crucial role, with tax benefits and subsidies for environmentally friendly vehicles appealing to individual buyers. These incentives encourage purchases of new, energy-efficient models, ensuring that individual buyers remain the largest consumers in Israel's automotive market.

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Top Players in Israel Automotive Retail Market

• Delek Automotive Systems Ltd
• CARASSO MOTORS LTD
• Automax Motors Ltd
• Lexus
• Other Prominent Players

Market Segmentation Overview:

By Service Type

• Dealership
• Online Retail

By Coverage

• New Car
• Used Car
• Service & Parts
• Finance & Insurance

By End User

• Individual
• Fleet Operator