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Automotive market moves into higher gear as demand surges

Dealers upbeat on outlook as sales on par with glory run of 2008

A family checks out vehicles at the Toyota showroom in Dubai
Image Credit: Gulf News Archives
A family checks out vehicles at the Toyota showroom in Dubai. Buyer interest has cut across all model ranges and not limited itself to the premium end or the entry level. There was even an increase in demand for used cars in the first quarter of this year.
Gulf News

Dubai: A rollicking January, a slight dip in February and a late surge over the last two weeks of March. That more or less sums up what the local automotive market went through during the first quarter.

But it was more than enough to give dealerships a chance to dream big ... once again. According to market feedback, the first quarter experienced demand that was on par with that of the glory run of 2008. "If it were not for a relatively weak February, we would have even crossed our 2008 first quarter tally. Even then what was achieved shows that the local auto sector is having good legs," said a dealership for a leading European make.

Estimates suggest that car sales in the UAE in 2008 crossed 325,000, making it the best year by quite a significant margin. After a disastrous showing in 2009, the sector managed a slight recovery the subsequent year. And in 2011 it finally managed to shake off the recession induced blues. This year is about gauging how much of a distance it has managed to place between itself and the troughs of 2009.


The first quarter performance provided all the right signals. "The overall UAE car market is performing strongly year to date with many positive indicators," said Felix Welch, director of sales and marketing at Arabian Automobiles Co.

Interestingly enough, buyer interest has cut across all model ranges and is not limited to the premium end or the entry level. In fact at the start of the year there were some concerns that mid-income buyers would not be as likely to head for the showrooms. In actuality, that has not been the case. "We remain cautiously optimistic on the outlook for new vehicle sales," said Welch, who added that its mid-market models — the Altima and Maxima — together saw a 30 per cent spike compared with a year ago tally.

"The story on used car sales too is also very encouraging with our sales up 40 per cent in the first quarter of this year."

This is a sentiment being repeated at just about every other dealership. Whatever the economic situation in the Eurozone or the humanitarian crisis in Syria, these seemed distant enough to have no impact on demand for new car sales in the UAE.

Both in demand and value terms, this has to be the best-performing category within the retail sector.

"Personally, I feel that demand has been consistent with the last quarter of 2011," said Mark Kass, regional managing director at Al-Futtaim Honda. "Clearly, the Dubai Shopping Festival fuelled the month of January, whereby a drop-off was inevitable during February 1. Stock is recovering fast within Honda and we are looking for an upbeat second-quarter performance with the introduction of a new product."


Now, if the second manages to sustain the momentum, or to pull in higher volumes, that would be the impetus needed for dealerships to keep 2008's overall tally in their sights.

"If this year's car sales manage to overtake 2008's, it would conclusively prove that the 2008 showing was not a fluke, a one-off," said the official at the dealership representing a European make. "That would make for a decisive statement."

And one, no doubt, that local dealerships would want to hear again and again.

Dubai Advertising hoardings are blaring it out. And if by chance one were to miss it, a tele-sales caller would make sure the message reaches you.

Aggressive automobile financing rates are back in the public spotlight as banks align with dealerships to pull in car buyers into the showroom and get them to drive off with brand new vehicles.

Al Futtaim Motors is advertising 1.99 per cent for new Toyota models, while Emirates-NBD has lined up a 2.99 per cent financing through for Volkswagen.

"We have seen continued support of our automotive funding requirements throughout the difficult economic period," said Steve Faulkner, managing director at Al-Futtaim Finance. "We also witnessed in Q1 our partners deploying marketing campaigns to drive volumes [and] enabling a fast start to the year.


"It is clear that with the Central Bank lending norms introduced in 2011 - of driving down consumer debt burden ratios coupled with the introduction of a minimum 20 per cent down payment - the credit risk has reduced. This fits nicely with the banks' current loss experiences, which are lower today than they have been in many years."

According to Faulkner, partner banks currently have rates from 2.99 per cent to 4.5 per cent, depending on the customer profile and other criteria.

At Arabian Automobiles, zero per cent finance is available on newly introduced Nissan Sunny, while it is 2.99 per cent across the board for the entire Infiniti range. "The auto sector bank lending activity is healthy and competitive, which is something that is great for consumer choice and flexibility," said Felix Welch at the dealership.

"Banks have become increasingly flexible on their profit rates thanks to the additional security the down payment regulations have brought, plus a lower likelihood for defaulting."

 Positive trend

Al Masaood Automobiles, the Nissan dealership in Abu Dhabi, recorded a 49 per cent gain in sales during the first three months compared with last year. It follows on from a strong showing in the fourth quarter of 2011, when sales were 35 per cent higher than the average in the first three quarters.

"It is definitely a positive trend and Al Masaood Automobiles is continuing its offensive with the above market performance consistently since September 2011," said Irfan Tansel, general manager at Al Masaood Automobiles.