The car market in the UAE is expected to contract by 8.5 per cent this year, as consumers postpone big purchases.
Car market expected to shrink by 8.5%
The car market in the UAE is expected to contract by 8.5 per cent this year, as consumers postpone big purchases during the economic downturn, according to a London-based market research firm. Business Monitor International (BMI) had previously predicted that the Emirates' car sales would grow by 2.9 per cent.
But a steep fall in sales during the first half of this year prompted the revision, said Anna-Marie Baisden, BMI's head of automotive research. The worldwide car market has been hit hard during the recession as banks tightened lending criteria, including raising minimum salary requirements, while consumers, worried about their personal finances, decided to save more than they spend. In the first half of this year, car dealers in the UAE estimate the market fell by as much as 48 per cent.
BMI estimates there will be 324,900 vehicles sold this year, some of which are destined for re-export, Ms Baisden said. "Given such a drop in sales and the level of unsold stock remaining for dealers, the analysts revised our previous forecast for growth," she said. Sales in the second quarter did improve from the first three months of this year, Ms Baisden said. Car dealers boosted sales by linking up with banks to make it easier for buyers to secure financing, with deals that offered lower minimum salary requirements to qualify for loans, contributions to customers' downpayments and the promise of a cash payout if the buyer loses their job.
"In Q2 there are already signs that things are improving," Ms Baisden said. "While you might not necessarily see a massive return to growth by the end of the year, the second half is going to be better." Mercedes-Benz sold 1,293 cars in Abu Dhabi and 1,767 cars in Dubai in the first half of this year, down 12 per cent and 28.9 per cent, respectively, compared with the first six months of last year, which was a record year for car dealers in the Emirates.
Frank Bernthaler, the director of sales and marketing for Mercedes-Benz cars in the Middle East and Levant, said the total number of sales had fallen and he did not expect a major shift during the second half of this year. "Overall, people are not sure whether they are going to earn the same salary or have a job next month, and that all affects buying conditions." At General Motors (GM), sales in the UAE dropped by 40 per cent during the first half of this year, said Mahmoud Samara, GM's regional manager for the lower Gulf.
While there are no official figures on sales, car dealers in the region share their own statistics which show that the UAE market has shrunk by 48 per cent in the first half compared with the first six months of last year, Mr Samara said, making it the worst hit market in the Gulf. He said the biggest contributor to the slowdown in sales was the number of would-be car buyers who no longer qualified for bank loans. Up to half of applicants could not get financing, against average rejection rates earlier of 6 per cent or 7 per cent. GM implemented "buyer friendly" programmes toward the end of the first quarter that helped boost loan approvals by 20 per cent, Mr Samara said.
The luxury carmaker Bentley, whose dealerships in the UAE were its top-selling outlets worldwide last year, said sales have fallen by 22 per cent in the first half compared with the first six months of last year. However, Bentley said, it expected to reach 2008's levels of sales by the end of the year, at 219 vehicles. Audi sales have dropped by 28.4 per cent at its UAE dealerships during the first half of this year, with sales of roughly 1,100 cars, according to Jeff Mannering, the managing director of Audi Middle East.
"The UAE has been among the more badly affected markets," he said. "The dealers have implemented some additional programmes in the areas of leasing and finance, but we have not and will not resort to panic discounting measures to maintain our market shares." Rolls-Royce said sales in the UAE during the first half were slightly better than for the same period last year., Frank Tiemann, the corporate communications manager for Europe and the Middle East, did not give figures for the UAE but said sales in the Middle East represented roughly 20 per cent of the 329 cars sold worldwide in the first half of this year. Sales globally dropped 33.5 per cent from the same period last year, he said.
BMW sold 1,442 cars in Dubai and 1,241 cars in Abu Dhabi in the first six months, a drop of 26 per cent and 13 per cent respectively compared with the same period last year. Hugh Dickerson, the general manager of sales and marketing for Al-Futtaim Motors, which sells Toyota and Lexus cars, said sales were down but gave no details. However, he said, last month was shaping up to be the best month for sales so far this year, in part because of Al-Futtaim Motors' offer of a 15 per cent cash payout for buyers who lost their jobs because of the downturn.
"I don't see a sudden turn around in fortunes," Mr Dickerson said. "But we don't see it slipping away any further." *with additional reporting by Stefanie Kerschke email@example.com