With inventories hit by Japan's earthquake, Al Futtaim Honda of Dubai sees flat sales this year.
'Flat' Japanese car sales expected
Al-Futtaim Honda expects sales to hold steady this year despite a dramatic fall in supply because of the March 11 earthquake and tsunami in Japan.
The distributor, which obtains all of its Honda models from factories in Japan, said that its imports of Japanese cars fell by 45 per cent after the earthquake but that the situation had eased.
The company was already dealing with rising costs before the earthquake as the yen appreciated against the US dollar over a two-year span. The dirham is pegged to the dollar.
"We are urging [Honda] to look at different production sources, because one of the things that has hurt the motor trade in the last two years for Japanese brands is that the yen has appreciated against the US dollar," said Mark Kass, the managing director at Al-Futtaim Honda. "Following that, we have had the catastrophic events in March that have fuelled shortages."
Al-Futtaim Honda now aims to complement the high-volume business of its sister company, Al-Futtaim Motors and offer customers a more luxurious but higher-priced car.
"I don't just want to register thousands of cars on the road and make no money from doing it. I'm not chasing volume, I'm chasing quality," Mr Kass said. "If you're asking me how I built my budget this year, we expect a flat performance on 2010, and that was intentional. If we can achieve a flat volume over 2010, we will be doing well."
Honda had planned to unveil its new Civic across the Emirates last month but has deferred the launch to November at the Dubai International Motor Show.
"Our production is coming back, and by the end of this year we will be at full capacity across all models," Mr Kass said. "We didn't think we would get back to form until April 2012."
Because the company had planned to launch the new model last month, it has few Civics in supply ahead of Ramadan, traditionally one of Honda's busiest sales months. "We are short of some models and I don't want to cover that up," Mr Kass said.
The company declined to give sales figures.
"We are going to be tight on some models during Ramadan," he said. "We are remodelling the business accordingly, and what we have done is amended our business plans for 2011. We've had to manage our expectations and take a point of realism."
Al-Futtaim Honda's sales have also been affected by rules recently imposed by the Central Bank requiring a 20 per cent cash deposit for car purchases and limiting the amount of debt that borrowers can take on.
"It was quite harsh in some cases," Mr Kass said. "They have to make sure indebtedness is not too high, and I quite welcome that, because what it actually does is help people manage their own finances."
Honda recently launched an "advantages" financing scheme in which the amount a customer pays each month depends on his expected usage of the car and, consequently, the value of the car after 24 or 36 months.
Mr Kass said it was a "low-cost alternative" to traditional financing because monthly payments are lower for those with lower usage. "You are not funding the total sum like a normal loan," he said. "The future value of the car is not taken into account in traditional financing."