People are keeping older cars will be getting more maintenance work done on them. Car retailers see this as an opportunity to make up for lower sales.
Car service business gets tune up
When Aslam Moola took his silver 2009 Nissan GTR for an oil change, he was shocked when he got the bill. "They charged me Dh1,000 (US$272) for oil, not an oil filter, not any lubricant, just for the physical five litres of oil," he says.
The 41-year-old oil and gas executive complained to the workshop mechanics, who responded that the GTR was a special edition car that needed a specialised service. After spending Dh400,000 to buy the sports car, Mr Moola was not impressed. "My experience here with dealer service is that they tend to be quite expensive and don't offer the value they charge," he says. "And they have a mindset of replacing rather than repairing. Not looking at what is the issue but, 'what can we replace?'. And that is not my experience in other countries.
"The dealers are also realising that customers are finding viable alternatives to dealers for maintenance and I think they are beginning to adjust."I It is these lacklustre experiences that dealerships in the UAE hope to make a thing of the past. From increasing the training levels of their workshop staff, to opening newer and bigger service centres, car dealers in the region are working to improve what happens to the customer after they first drive off the lot.
Now that competition for sales is steep, car retailers are trying to cater more to customer needs to stay ahead of the game and bring in more revenue from after-sales service. Al-Futtaim Motors, which sells Toyota and Lexus cars in the UAE, has increased its spending to provide after-sales service by 35 per cent, says Len Hunt, the company's group director for the car division. A portion of the millions of dirhams the company is set to spend has been earmarked for a new training facility in Sharjah that is set to open in June, where Al-Futtaim staff will learn to paint cars and do bodywork, he says. Funds will also go towards a new system in which several mechanics work on a single car at the same time with specialised tools to complete the service in less than an hour, he added.
"Prior to the recession, most manufacturers were just inundated with orders and it was very much an order-taking economy," he says. "Ourselves, we were seeing 20 per cent growth. Now, the strongest companies who will survive will focus on customer care. We can see somebody three or four times a year for servicing. We are trying to make it quicker for them, with more people on the ground, and more technology in a shorter time."
As recently as two years ago, many UAE car owners would change their vehicles frequently. People would trade in their two-year old BMW for a shiny, new model off the showroom floor. But after the onset of the economic downturn, local banks tightened up lending criteria and many would-be buyers were suddenly unable to get car loans. After years of double-digit sales growth when the supply of cars in the Emirates could not meet demand, that all changed in late 2008, says Michel Ayat, the chief executive of Arabian Automobiles, which sells Nissans and Renaults in the region.
He estimates that car sales across the UAE plummeted by as much as 40 per cent. "For the first time we found ourselves dealing with the market, with customer sentiment very low and there was no demand," he says. "So we started our journey to liquidate the stock, and here, the few organisations or distributors that were lucky to have excellent after-sales service were able to survive the difficult time." Last year, while car sales shrunk, Arabian Automobiles' after-sales business grew between 25 and 30 per cent, he says. "They don't buy cars, but as an alternative they had to take care of their cars," he says. "And from now, more demand will be for the after-sales." MK Rajkumar, the director of after-sales service for Arabian Automobiles, says with regards to Mr Moola's complaint, the company plans to look into the issue and he offered to speak with him to help resolve it.
"The GTR is a very, very special car. It is a super car, and there are a lot of technical requirements from Nissan when it comes to service. We are not allowed to use any local oil, we use Nissan GTR oil, which is specifically designed for this high performance car," he says. "We want to keep customer satisfaction number one." Last year, Arabian Automobiles decided to add showrooms and service centres and expand its existing ones with an investment of Dh750 million, Mr Ayat says. It opened outlets in Dibba and Fujairah last year and its expanded facilities in Ajman, Umm al Qaiwain and Dubai will open this year, he says.
Looking at what happens after the car was purchased had not been the main focus of many regional car dealers because profit margins on sales were much higher, says V G Ramakrishnan, the director of the automotive and transportation practice for South Asia and Middle East, at the research consultancy Frost and Sullivan. The average profit margin worldwide was roughly 2 per cent, but in the Middle East it was as much as 10 per cent, he says. As a result, some dealerships did not invest in customer care and owners could be left waiting days just to have their cars repaired, he says. "With the drop in vehicles sales, they needed to do more to stay afloat," Mr Ramakrishnan says. Liberty Automobiles, which sells Chevrolet, Hummer and Cadillac brands in the region, also plans to overhaul its practices at six service centres in the UAE to capture more customers.
This includes extending working hours for service, picking up and dropping off vehicles to customers' doorsteps and soliciting more customer feedback through surveys, says Duncan Peat, the newly appointed managing director of Liberty Automobiles. This is part of a three-year plan to focus on service, but customers should start to see results in the next few months. "This is something that we needed to do, although it has been hurried along by what happened last year," he says. "The company that provides the best service or an improved or enhanced service to the customer are the companies that will survive best." Some vehicle dealers are branching out to cater to this growing segment. Al-Futtaim will launch a line of express-service facilities this year, says Mr Hunt. The car retailer noticed that while its car sales dropped steeply last year, to about 56,000 down from 98,000 in 2008, its service appointments stayed at the same level.
"We definitely noticed that people aren't replacing their car at the rates that they were, but are looking after the ones they've got." The concept is still in the early stages, but Mr Hunt says it will service all vehicle brands and will start with an outlet in Dubai this year. The Al Fahim Group, whose Emirates Motor Company subsidiary sells Mercedes-Benz vehicles in Abu Dhabi, will also launch a line of service bays at ADNOC stations in the capital.
This new venture comes less than a year after Emirates Motor unveiled its 93,000-square-metre showroom and service centre in Musaffah, Mercedes-Benz's largest worldwide. Rashed al Fahim, the managing director of Al Fahim Group, says that as the number of older cars on the road grows, the demand for service will increase. The group will open four locations in Abu Dhabi this year to service all vehicle brands, he says. The group plans to extend the concept to Al Ain and other emirates. "People now during the recession do not buy new cars and mainly stay with their older vehicles," he says. "So this is a way to enter another business related to cars."