Dubai: It was a mix of the external and internal combustions that weighed heavily on demand and sales of Japanese automobile brands during the first-half of the year.
If the quake that devastated Japan in March threw shipments out of gear during the crucial second quarter, there was also the impact of the UAE Central Bank's diktat on automotive financing that slowed down buyer demand from early May.
Now, with the onset of summer the dry spell is well and truly on for new car sales in these markets. Also, this year with Ramadan coming in August, it could be early September before the automobile sector can expect a pick-up in demand.
To get an update on how local dealerships representing Japanese makes are faring, Gulf News spoke to Felix Welch, director of sales and marketing at Arabian Automobiles.
Gulf News: Going by market feedback, the two months since May recorded a noticeable drop in new vehicle sales. Is there a real concern that it might lead to a stacking up of inventory heading into summer?
Felix Welch: Although Arabian Automobiles' year-to-date sales are up 20 per cent compared to the same period in 2010, we have seen a drop off in consumer enquiries over the last two months. And we believe this is partially due to the tighter UAE Central Bank lending rules pertaining to car loans and the onset of the summer vacation period.
Concerning our forward stock levels, we are happy to see that inventory of all our models remains at a healthy level, thanks to some quick actions we took post the Japanese earthquake disaster.
It is also now well understood that Nissan Motor Company moved both quickly — and efficiently — to restore production levels at its factories.
If the dry spell continues for a while longer, would it have a material impact ahead of the 2012 model year launches?
We do not intend to delay our new 2012 model launches.
In fact we already released the 2012 model year price of one of our volume sellers, the Nissan Sunny sedan. Again, we are in good shape on our current 2011 model stocks thanks to prudent inventory management.
So we do not foresee a delay in releasing our new models.
It's more than eight weeks since Arabian Automobiles has been running the Freedom campaign. Are you starting to see any uptick in sales transactions as a consequence?
We now have completed a number of sales of both Nissan and Infiniti vehicles via our new ‘Freedom' personal contract purchase finance product. The sales generated are running at our anticipated levels.
However, consumers will take time to understand this flexible new way of financing and owning a car, but with more dealers launching such products into the market we think this type of product will grow in popularity with time and consumer acceptance.
Nissan and Infiniti Freedom is now a permanent purchasing option for our customers going forward.
Is there a move on these buyers' part to go for the lower to mid-priced models to ensure their down payment load is lower?
We don't see this happening. In fact, thanks to the lower monthly payments offered by Nissan and Infiniti Freedom our customers are able to choose a higher priced vehicle if they want to.
On your part, are you subsidising the cost of the vehicle in any way? In other words, dropping your margins?
No, there is no subsidy involved. The monthly payments on Freedom are generated by the customer effectively financing 50 per cent of the vehicle's value and the bank interest rate is also competitive.
The yen is becoming quite strong. Is it being reflected in the new shipments? Has there been any direction from Nissan on the stance regional distributors should be taking in regard to the yen?
The yen's impact is reviewed by ourselves and Nissan's regional office in Dubai on a constant basis.
However, only a certain number of vehicles from the Nissan and Infiniti product ranges are sourced for the region from the Japanese factories with others coming from the US, Europe, Mexico, Thailand and (South) Korea.
This is a reflection of Nissan Motor Company's strategy to lessen the impact of currency fluctuations by having a geographically diverse manufacturing footprint.
What about the yen's impact on spare parts pricing?
For sure the yen has affected spare parts pricing in the past, but for the last year it has not had a big impact.
On an on-going basis, Nissan's regional office assists us in offsetting yen fluctuations to keep our retail parts pricing consistent.
But from time to time our prices can go up and down. We believe this situation is well understood by our customers.
Overall, how has the first-half of the year been for Japanese makes in the UAE? Do you see it impacting on re-export demand?
Overall it has been a positive first-half with our sales up 20 per cent compared to first half of 2010.
Following the earthquake, Japanese manufacturers have, or are, restoring production to previous levels at differing speeds, and this has certainly impacted stock levels in the UAE among the dealers.
Global market demand remains high due to the production constraints. We are focused on our domestic markets and ensuring that we meet domestic demand as best as we can.
