Abstract
The United Arab Emirates (UAE) autos market faces a tough 2009 as it feels the
impact of the global
economic slowdown. This is likely to bring an end to
the robust growth the UAE has registered in recent
years. Nevertheless,
there are encouraging signs in the market that suggest a recovery may not be
far off.
Dealers in the UAE are facing unsold stock and dwindling profit
margins as consumers pull back.
Consequently, we have revised our UAE
sales forecast from 2.9% growth to a contraction of 8.5% this
year. We
foresee sales of around 324,900 units. However, even in the current global
economic scenario,
manufacturers continue to focus their attention on the
Middle East, which has been one of the more
resilient markets for autos
when compared with North America and Europe.
In May, French automaker
Renault launched its first crossover sports utility vehicle (SUV), the
Koleos,
in the country. The vehicle is aimed at the segment in the Gulf
Co-operation Council (GCC). Meanwhile,
US automaker General Motors (GM)
said in April that its decision to cut back on its global dealer
network
would not affect distributors in the Gulf and Middle East.
While a sales
contraction is on the cards this year, BMI believes that the market will
rebound in 2010. We
are encouraged by signs that the credit situation is
improving. In addition to offering the opportunity to
lease vehicles,
dealers are teaming up with banks to provide autos loans to buyers who
wouldn’t normally
be able to qualify for a loan. In April, HSBC
Middle East reportedly slashed by half the minimum salary
requirement for
autos loans. Likewise, Emirates NBD, the biggest consumer bank in the UAE,
cuts its
minimum salary requirement for autos loans.
And while new car
sales may be slowing, the UAE remains a robust market for luxury sales. Sales
in the
segment have not been immune from the downturn. In Q109, BMW Middle
East posted a 9% fall in
sales. But regional sales rose and Marketing
Director James Crichton said the drop was in line with its
estimates and
that the company remains optimistic about the region’s growth. The
largest market during
the period was Dubai with 772 unit sales, followed
by Abu Dhabi on 589 units. Crichton made reference
to the strong
‘underlying fundamentals’ of the Middle East’s luxury
segment, reflected in sales for
BMW’s new X6 Sports Activity
coupé and 7-Series sedan.
Meanwhile, emirates like Abu Dhabi are
gaining a foothold in the international autos sector by buying
stakes in
leading car companies. Aabar Investments, an Abu Dhabi investment fund, bought
a 9.1% stake
in German autos company Daimler in March. It agreed to invest
EUR1.95bn in the automaker, making it
the largest shareholder in the
group. In addition to producing luxury Mercedes-Benz vehicles, Daimler
manufacturers Smart cars, and the two companies intend to team up to develop
electric vehicles (EVs).
Under the agreement, an industry training centre
will also be established in Abu Dhabi.
BMI remains optimistic over the
forecast period, which concludes at end-2013. We expect the recovery
to
begin next year and accelerate as growth picks up. 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.
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