Abstract
Following years of soaring double-digit growth rates, the UAE car market will
contract by 8.5% in 2009
amid expatriate job losses and the credit crunch.
The confidence in continued growth in the UAE' s
automotive market has been
destroyed by reports of steep declines in sales in the first two months of
2009. Dealers and carmakers estimated at 40-50% year-on-year (y-o-y) fall in
sales in the period due to
restrictions on credit, which funds 70-80% of
UAE sales. The loan rejection rate for vehicles had risen
from 5% to
20-30%, according to one carmaker.
The decline in the UAE market appears
to be fairly consistent across all emirates. However, there is
variation
across market segments - luxury cars are still holding up - and consumers are
reportedly
mindful resale values. BMI envisages that the premium segment
will continue to thrive, even during the
downturn, as residents with high
net worth will remain relatively unaffected by the credit crunch. Dealers
say that lower-cost cars are the worst performing, although BMI believes that
over the medium term
smaller, more economical models will become more
popular. At the present time, consumers who are
most likely to purchase
vehicles from this segment are holding back purchases, waiting for further
discounts, more favourable credit terms and mindful of the uncertainties in
the wider economy.
BMI identifies two main trends in direct response to
the credit crunch: an increase in car leasing and an
increase in purchases
of parts and components by service centres. Premium car dealers in the UAE
are
turning to leasing schemes as customers find it increasingly difficult
to secure loans. Since banks have
tightened loan requirements in the wake
of the economic slowdown, dealers have reported a reduction in
sales and
enquiries. In the automotive parts sector, BMW Middle East has reported 7%
growth for its
Parts and Accessory Sales unit in 2008 as customers turn to
fixing old cars rather than buying new ones.
Carmakers are also expanding
pre-owned certification schemes.
In the light of recent sales and
registration figures and the outlook over the next year or two, BMI has
revised down its automotive sales forecast from 2.9% growth in 2009 to a
contraction of 8.5%, expecting
a drop to around 324,900 units followed by
a modest upturn of 2.0% in 2010. This marks the end of the
double-digit
growth rates enjoyed by dealers in recent years, when Dubai was riding high on
an
investment boom. A return to the levels seen in 2008 is not likely
until 2012. Nevertheless, by 2013 sales
should reach 422,145 units, an
increase of 18.9% over 2008 levels. Over the period, BMI expects to see
some consolidation within dealerships, with smaller firms at risk of going out
of business and larger
dealerships taking on their sole distribution
rights. There is also scope for the emergence of more cross-
Emirates
distributors; at present, sole distribution rights differ from emirate to
emirate.
| 
View Cart
