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Luxury car dealers feel the worst is over as more customers are coming back to their showrooms to view their products.
Luxury car dealers feel the worst is over as more customers are coming back to their showrooms to view their products.

Dealers back in the driving seat

After a rough ride because of the economic downturn, sales of luxury cars are picking up and confidence is returning.

A On the floor of the Audi showroom in Dubai, a couple and their young son climb into an SUV.

Two cars down, a man in his 40s hops into the driver's seat of an Audi A5 Sportback, while three women draped in black abayas sweep in through the showroom's sliding doors.

Business appears to be brisk on this Monday night, but there have been many much quieter times for car dealers in the UAE over the past couple of years.

Like their fellow dealers across the world, they have gone through a rough ride because of the economic downturn. While there are no official figures, car sales in the Emirates dropped by as much as 40 per cent in 2009, dealers say.

But, at least with the luxury side of the market, many dealers feel the worst is over and say that customers are returning to the showrooms and are starting to buy again. Car makers hope that this momentum will continue throughout the year.

"We have experienced a recovery in the second part of [last] year," says Pietro Innocente, the general manager of the Middle East and Africa for Ferrari.

"The year started very slow, and then accelerated very much in the second part. This trend should be consolidated in 2011. I'm forecasting a more robust growth in 2011."

Regional car dealers' latest sales bear out his optimism. Last year Ferrari sold more than 300 cars across the region, surpassing the levels of 2009, when sales rose 30 per cent over 2008.

BMW sold a record 17,119 cars across the Middle East last year, helped by a 39 per cent annual jump in sales in Abu Dhabi alone.

Rolls-Royce also sold a record 2,711 vehicles globally last year, helped by a doubling of sales in the region from the previous year.

This was fuelled by the introduction of the Ghost, a less expensive model at Dh1.1 million (US$299,000) than the Phantom at Dh1.6m. The Ghost has introduced Rolls-Royce to a broader segment of younger drivers.

"I'm very optimistic that we'll see sustainable growth in the next [few] years given that the economy is getting stronger and stronger," says Torsten Mueller-Oetvoes, the chief executive of Rolls-Royce.

"People are coming back to the showrooms. They're prepared to spend money again and that should help us. Our dealers, especially in the Middle East, are investing in new showrooms."

But it has not been all good news. Bentley experienced a 2.3 per cent dip in sales in the Middle East last year, according to Chris Buxton, the car maker's regional director for the Middle East, Africa and India.

"Last year was a harder year for us, because generally the market is very much new-product orientated, and there was a lot of new product from our competition," he says, adding that Bentley hopes the new Mulsanne model, introduced late last year, will speed up sales.

"Confidence is coming back I think we will have a good year," Mr Buxton says.

Anna-Marie Baisden, the head of car research for Business Monitor International (BMI) in London, says it is too early to accurately forecast sales figures for the coming year, as results for last year are still rolling in. But she believes global growth this year will not be "quite as rapid".

In the UAE, however, BMI expects improved sales, possibly in the region of 14 to 15 per cent.

"The key drivers of growth have been improved consumer confidence, coupled with better access to finance," Ms Baisden says.

"We flagged throughout the latter part of 2010 that more new financing companies, especially those established by car makers and dealers themselves, would help car sales. "New models on the market appear to have generated more interest too, as many car makers have reported strong growth for new models."

The luxury sector will have a big part to play in the region.

"The premium brands fared very well in 2010, BMW posted record sales in the region and Rolls-Royce doubled its sales year on year," Ms Baisden says.

"Although there is likely to be the low base effect at work here again, we are still bullish towards luxury cars in the region, even though we also believe there will be growth at the other end of the scale, in the volume market and small cars in particular. This is mostly driven by a young working population and any lingering effects of the credit restrictions."

Michel Ayat, the chief executive of Arabian Automobiles, which sells Nissans and Renaults in the region, believes the worst is over. Last year, his company saw 12 per cent growth over 2009 and Mr Ayat says he is aiming for a similar performance this year, but companies and consumers will continue to be cautious.

"After 2009, which was a year of confusion in the market of the United Arab Emirates where sales dropped 40 per cent, I can say that the industry has bottomed out," he says

"So in 2010, the curve started going up It will definitely be better than 2010 but I cannot see a big jump."


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