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United Arab Emirates Autos Report Q4 2009
Market |
Automotive and Parts |
Report Type |
Market Research |
Country |
United Arab Emirates |
Published |
1 October 2009 |
Number of Pages |
59 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
United Arab Emirates - new vehicle registrations in Dubai rose just 4.5% in the first six months of 2009
Along with improved credit conditions, there are signs that the UAE economy overall is on the road to recovery. In August, the head of the UAE’s central bank said he expects crude prices to rebound in 2010 and help the economy return to growth. The sharp fall in crude prices in the last year has been the main source of the decline in economic growth in the Gulf states, and consequently, auto sales.
It is believed that as the UAE economy gains strength, it will help lay the foundation for a recovery in auto sales. We have revised our forecast for 2009 to reflect the early shoots of recovery, and now expect total auto sales to contract 5% in 2009 versus our earlier forecast of a decline of 8.5%. We expect sales to stabilise next year and for growth to pick up in the medium term. By the end of the five-year forecast period, we expect sales to have made a strong recovery with annual sales of 440,468 units, exceeding the peaks scaled during the 2008 boom.
The global economic downturn, along with a credit freeze, has sent the autos market reeling in the UAE.
According to the Licensing Agency of the Dubai Roads and Transport Authority, there has been a rapid slowdown in the number of new registered vehicles in the emirate. As reported by Gulf News, new vehicle registrations in Dubai rose just 4.5% in the first six months of the year, compared to a 17% increase in the year-ago period.
While financing still remains, for the most part, difficult to come by, there are signs that credit is trickling down very slowly to the consumer level. It will be some time before the heady days of credit-fuelled buying return – if ever. Still, auto sales are showing some signs of life. Anecdotal evidence suggests consumers are paying cash for vehicles, as piles of unsold stock have created a buyer’s market for autos.
Dealers have had to offer aggressive pricing and promotional offers, resulting in a price war. The competitive pricing is providing a boost to South Korean automakers such as Hyundai, whose prices have become more competitive compared to their Japanese and US counterparts because of a depreciation of the won. Limited-time promotions being offered by Hyundai in August reportedly include discounts of as much as 20%.
On the manufacturing front, the UAE does not possess a sizeable domestic automobile manufacturing capability. However, its investments in leading auto majors could lead to technology transfer in the future. Leading the charge has been Abu Dhabi’s Aabar Investment, which made an investment in electric car maker Tesla Motors in August, just months after buying a stake in Daimler.
Although the UAE is regarded as a major destination for premium cars, the budget car sector is also growing, as many more buyers are becoming cost conscious amid the global economic downturn. Many dealers are trying to appeal to price-savvy consumers, offering finance plans that let them spread their payments out over longer periods. An area of concern, though, is the second-hand market, which has been hit by a sharp downturn in re-exports due to lack of demand from traditional destinations such as Saudi Arabia and Africa.
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