Sector pressures not reflective of fundamental weakness; demand expected to improve in Q3: Budget Saudi CEO

Fawaz Danish, CEO of United International Transportation Co. (Budget Saudi)

The recent pressures facing the car rental sector do not reflect any weakness in its fundamentals, but were primarily driven by geopolitical developments, said Fawaz Danish, CEO of United International Transportation Co. (Budget Saudi).

Speaking to Argaam, Danish said the impact was more pronounced at the onset of the events, before individuals and companies gradually adapted and activity began to recover.

He noted that a return to normal conditions could drive demand to stronger levels, given the travel plans and requirements that were postponed during the period.

The CEO added that demand could rebound once the uncertainty subsides, citing the sharp increase in global travel following the lifting of restrictions imposed during the COVID-19 pandemic.

Q3 2026 outlook

Danish said current indicators point to a positive outlook for Q3, with operating levels and demand expected to improve compared to Q2 2026.

He attributed the expected improvement to continued growth in domestic tourism, the gradual recovery in inbound travel, and companies that had previously postponed decisions on long-term rental contracts resuming their purchasing decisions.

Greater clarity among individuals and companies has also started to support a recovery in activity and decision-making, which is expected to benefit the sector in the coming period, he added.

Danish noted that Q2 2026 results should be compared with caution, given the SAR 25 million in non-recurring non-operating income recorded during the quarter.

Q2 2026 performance

Danish said the company’s operating performance improved significantly in Q2 2026 compared to Q1 2026.

Excluding the SAR 25 million in non-recurring non-operating income, net profit reached around SAR 68 million in Q2 2026, compared to approximately SAR 34.45 million in the previous quarter.

Regarding the short-term rental business, he said fleet utilization began to improve during the final month of Q2 2026, coinciding with the start of the summer season in Saudi Arabia.

Demand for short-term rentals increased by around 3%-4% during the final month of Q2 2026, while short-term rental fleet utilization reached approximately 65%-66% at the start of Q3 2026.

However, Danish stressed that utilization levels have not yet returned to normal.

Domestic tourism was the main driver of the improvement, supported by increased travel by citizens and residents to the southern regions and destinations with moderate climate, as well as Makkah, Madinah and Jeddah.

Al Baha also recorded strong demand during the summer season, positively contributing to short-term rental activity.

As for long-term rentals, Danish said the company has begun to see improved demand after a period of delayed decision-making by some companies.

Some customers that had planned to order new vehicles postponed their decisions amid the uncertainty.

The company, however, is now receiving new orders as customers resume making decisions on rental contracts.

The business was also affected by supply chain disruptions, with existing orders unable to be delivered on schedule due to limited vehicle availability.

A two- to three-month delay in receiving vehicles postpones revenue recognition on rental contracts until the vehicles are delivered, he explained.

He also noted that this is a temporary impact and does not indicate a loss of demand, but rather a deferral of revenue to subsequent periods.

Supply shortages support used-car prices

Danish said delays in new vehicle deliveries also positively affect the company, as they support demand for used cars and improve vehicle resale values.

The shortage of new vehicles is driving demand for used cars and, consequently, supporting resale values.

Meanwhile, new vehicles may arrive at higher costs due to factors related to shipping and insurance.

Budget Saudi’s business model allows it to benefit, to some extent, from both sides of the market: shortages of new vehicles delay the delivery of some rental contracts, while supporting the value of the used vehicles it sells.

Vehicle recovery rate rises to 65-66%

Regarding used-car sales, Danish said the company sold more vehicles than usual during Q2 2026, alongside an improvement in resale prices.

Some of the vehicles sold had reached their target replacement age, while others could be disposed of given current utilization levels.

The vehicle recovery rate improved to around 65-66% in Q2 2026, compared to approximately 60-61% previously.

The increase in vehicle sales and improved resale values positively contributed to the business’s earnings, he added.

What happened to the used-car market?

Danish said the used-car market came under pressure during Q1 2026 due to increased supply, alongside a decline in the re-export of certain small cars, particularly those with engine capacities of 1.3-1.5 liters.

These vehicles are exported to several international markets, but geopolitical developments and higher transportation costs affected export activity, leaving larger quantities in the domestic market and putting pressure on resale prices.

The market began to recover toward the end of Q2 2026 as demand gradually picked up and the number of vehicles available declined, supporting higher resale prices.

Geopolitical events affected travel, business and Umrah

Danish said geopolitical developments had a significant impact on short-term rental demand, with the effects extending to tourism, business travel, airport traffic and religious visits.

The uncertainty at the onset of the events prompted many travelers to reconsider their trips, while business travel became more closely tied to essential needs than during normal periods.

Airports and air traffic were among the main channels through which the impact on demand was felt, amid concerns over flight cancellations, delays and travel disruptions.

He noted that domestic tourism helped mitigate part of the impact, with increased travel by citizens and residents between different regions of the Kingdom during the summer season.

According to data available with Argaam, Budget Saudi’s net profit rose 9% to SAR 93.38 million in H1 2026, compared to SAR 85.63 million in H1 2025.