InFocus | Autoplus
A market driven by demand
A buoyant economy and an increasing demand for luxury cars and SUVs make growth in the automobile sector inevitable.
- By Helga Jensen-Forde, Gulf News Report
- Published: 00:23 November 4, 2008
- Image Credit: Gulf News Archive
- There are 1.7 million cars registered in the UAE.
You only have to look at the vexatious traffic in Dubai to realise the motoring industry in the region is undoubtedly thriving.
With 1.7 million cars registered in the UAE—an astonishing 854,000 in Dubai alone — this shows no sign of abating.
There may be plans for bike lanes, an impressive Metro, a monorail and the introduction of hybrid taxis, but it seems residents here will not be parting with their cars just yet.
Michel Ayat, CEO of Arabian Automobiles, claims the total volume of the UAE automotive market in 2007 was nearly 300,000 vehicles.
Thanks to stable oil prices, and hence affordable fuel, while other parts of the world face a credit crunch and are turning to more economical methods of transport, there couldn't be a greater contrast in the UAE.
Michael Brightmore, General Manager, Al Futtaim Automall, says, "Relatively low fuel costs in the GCC have meant that the worldwide quest for fuel economy and smaller vehicle engines haven't gripped the region in quite the same way.
"The price of petrol was last increased in September 2005, and with no indication of an increase in the near future, motorists continue to purchase gas-guzzlers. In fact, the perception in the UAE seems to be 'the bigger and faster the better'."
Mohammed Saleem Tahir, owner and founder of Reem Automobiles, says, "Going back 20 years, people here were looking at cars as a means of transport. But over the last couple of years, they've been looking for cars such as Bentley, Lamborghini, Ferrari, etc, for the luxury factor."
However, car buyers aren't only seeking top-of-the-range marques, but also the latest models. "The demand for new vehicles in the UAE continues to outstrip that for used cars," says Brightmore.
"Previously, there was a consumer perception that the used car market was less regulated and therefore posed a higher risk than that of new vehicles. However, the second hand market has gone through some major changes in the last few years. Many distributors now offer a genuine quality used car alternative, allowing consumers the possibility to purchase a reliable and warranted used car that they really want, rather than be limited to a new car that they can simply just afford. This 'approved used car' market is rapidly growing and may well continue to do so, even in advance of the population expansion."
Steady growth
With vast numbers of residents coming to the UAE daily, growth in the already lucrative automobile sector is inevitable.
Ashok Khanna, Chief Executive Officer, Al Tayer Motors, says, "According to some industry reports, the UAE automotive market is forecast to grow at 7 to 15 per cent in 2008, which though below the growth experienced in 2007, is still a healthy number.
In our view, during the next five years the market will register steady overall growth of around 7 to 10 per cent, although some segments will do better than others."
One of the segments expected to grow exponentially is sport utility vehicles (SUVs). Ayat claims, "If we look at SUV sales, this segment of the UAE car market has grown from 26 per cent in 2006 to 30 per cent in 2007. The growth trend in SUVs can be observed clearly on the UAE's roads."
"We also see growth in commercial vehicle sales and those of luxury cars such as the Infiniti brand sold by Arabian Automobiles. In fact, Infiniti is the region's fastest growing luxury car brand. The luxury car market in the UAE has tripled in the last five years and, within the GCC, we have the biggest luxury market of more than 30,000 sales per year."
Meanwhile, Al Tayer Motors won an award for the highest worldwide sales for Land Rover and Jaguar last year, proving luxury car brands are indeed highly coveted in this part of the world — a trend that is set to continue.
"With a buoyant economy, the emphasis on the luxury and SUV segments will remain; however, value for money and the quality of service provided by dealers will continue to be important factors," says Khanna.
But with the Salik toll gates proving a sore point with many motorists, could this affect sales ultimately when the much larger network of toll gates comes into effect eventually?
Brightmore says, "The full effect of a widespread Salik network is difficult to predict and shouldn't be looked at as a single influence. Over the next few years, we are likely to see a much-improved public transport network with both the Metro coming on line and major improvements in the bus network."
"These two influences along with economic effects, in addition to any Salik effect, may well cause consumers to consider carefully the cost of their motoring. However, the vast increases forecast in the population here along with the continued desire for the personal freedom that cars give their owners, suggest that the car market will remain buoyant for the immediate future."
