Dubai: Discounts from the moment you enter a showroom, deferred payment terms that usually start after the third month and even longer, free insurance and extended warranties with five years now becoming a norm. And financing rates that are still around the 4 per cent mark. And if a dealership is feeling truly generous, even 0 per cent terms are on offer.
If despite all these incentives, prospective car owners in the UAE are still in two minds about whether to buy or not, they just don’t know what they are missing out on.
“Even when all the combined incentives are totalled and shown to a buyer as confirmed cost savings, he still keeps asking “Can you thrown in more offers?”,” said Karl-Johan Sandesjo, General Manager at Gargash Enterprises at Gargash Enterprises and Mercedes-Benz’s Dubai dealership. “Buyers are no longer satisfied with a typical promotional offer. The actual negotiation now starts after the dealer has put up all of what he can offer and then add some more.”
After four years of a sales boom, when growth was pulling in an average 15 per cent year-on-year, car dealerships in the UAE are starting to deal with 5 per cent or thereabouts. In this, automotive sales have not been impervious to the general decline in consumer sentiments apparent across all retail sectors. (Despite this, overall UAE auto volumes should still end the year at 420,000 units against the 400,000 odd units in 2014.) Dealerships are responding by slashing prices, with the average discounts on new cars averaging Dh3,000-Dh5,000. On pricier models, a buyer can even expect cuts that could range anywhere from Dh8,000-Dh12,000.
Manufacturers are helping out too, giving their dealer partners the extra flexibility on pricing. “We have clear directions on the extent to which they can raise the pricing of a model … but on discounts we leave it entirely to them on how far they can cut,” said Mark de Haas, President and CEO at Daimler Middle East and Levant. “It’s not just one or two markets on the outer fringes that have been affected by the regional situation, and the economy remains a major worry.
“That in turn is feeding into consumer sentiments — to get them buying, I think dealers are best aware of what needs to be done to convince them to buy.”
All of which leaves UAE residents with an intent to buy a vehicle or upgrade on what they have now in the best possible situation.
“If one dealership throws in a three-year warranty period, another would try and trump that by a five-year one,” said K. Rajaram, CEO at Al Nabooda Automobiles, and which represents Porsche, Audi and Volkswagen. “There’s a whole lot of one-upmanship dealers are engaging in — at the end of the day, it comes down to how desperate they want to sell their stock.
“For 2016, I’ve told my individual brand sales managers to be aggressive with their target setting. But that’s not the same as saying as to sell cars at any cost. That’ll will only come to bite dealerships later on.”
Many dealerships are looking to increased offtake by fleets, especially in Dubai, as offering a medium-term solution and compensate for slack demand on retail buying. Their thinking is that the construction and allied sectors will not be able to put off purchases of commercial vehicles. If more short-term jobs are thus created in key sectors, it would mean fleet operators will need to keep topping up the number of vehicles at their disposal.
Axel Dreyer, President of the Hyundai division at Juma Al Majid Est., says the current downbeat sentiments will shadow the automotive sector over the long haul. “Gone are the elaborate brand-focused campaigns that carmakers and dealers used to do,” Dreyer said. “These days it’s all short term and tactical.
“If dealers are having promotions through most of the year, that leaves nothing extra for them to do for the high-profile events such as the DSF or DSS. The big one now is the Expo 2020 and that’s still a good four years away.”
But in the near term, all that car buyers want is the real deal. Whereby dealerships have to put everything on the table to win a buyer’s favour.
UAE’s consumers have gotten hold of the wheels and they are the ones steering the industry’s fortunes — for better or worse.
