Dubai: For UAE car buyers, it is as if all the gears are aligned to perfection when it comes to deciding on their next set of wheels. The Japanese yen has been on the soft side for some time now making the ownership of Japanese-made models a comparative bargain.
To offset the yen advantage, local dealerships of South Korean auto marques have gotten aggressive in trying to match the offers on Japanese brands. Now, with the decline in the euro, other dealerships could be joining the action. All of which makes it even better when prospective car buyers head for the showrooms.
“Our importers regularly assess the effect of the exchange rate on their business, and therefore some BMW dealerships might have particularly interesting offers on selected models in place at this point of time,” said Johannes Seibert, Managing Director, BMW Group Middle East.
“Currency fluctuation is a normal challenge for companies that operate in world markets. As a principle, we try to keep our retail price level consistent in the Middle East markets, to protect the image of our brands and also the resale value of our customer’s cars.”
For the local automotive retail industry, that’s the flip side of any currency-led situation. No dealership would want to see a sudden and sharp dip in their showroom prices, affecting a model’s value perception, often irreversibly. In fact, the industry has been quite conservative in passing on currency benefits in the past. Instead they have opted to top up their incentive add-ons — free insurance, extended warranty schemes, etc — to get the buyer interested.
There are other ways that car manufacturers try to rein the impact of currency fluctuations. In the last decade, all of the major manufacturers started invoicing their Middle East shipments in dollars, rather than in euro, the yen or the Korean won. This is where the dirham’s peg — and in some of the other Gulf states — to the dollar helps.
Stable prices
“Audi Middle East trades in the local currency [in dirhams in the UAE] with our dealers and with Audi AG … thus we are not directly affected by the weak euro,” said a spokesperson at the regional office. Prices will remain stable.
“[Having] our operational currency as the dirham offers a greater currency benefit for dealers as it is less likely to be affected by currency fluctuations.” (The same applies to Audi spare parts and accessories pricing as well.)
But where dealerships — European or Japanese — can tap the benefit of favourable exchange rates is when competing for the big fleet orders. It gives them the extra manoeuvre room to put a pricing on the tenders that can make them strong contenders.
Industry sources that major fleet orders have not been as frequent during the first three months as compared to earlier quarters. It could be that most of the key deals were placed last year itself and major operators are taking a breather. But if the euro slips up any further, count on the European car dealerships to come in strong.
The overall UAE automotive retail market has been kind of slow after three exceptionally strong years. Key dealerships are throwing all sorts of incentives to lift buyer activity, while auto financing rates remain stuck in the lows.
A weak to weakening currency exchange situation can definitely be of some help.
