Used-car market poised for major shakeup

Dubai: The used-car market in the UAE, which is in a strong growth mode, might witness a slight slowdown in sales as financing becomes more difficult in the credit-dry banking sector, industry officials say.

The country's used-car market grew by about 50 per cent in 2007, according to Business Monitor International, an international research body.

Dubai and Sharjah are regional hubs for used and re-conditioned cars, which are re-exported to East Africa, West Africa, Afghanistan, Pakistan, Iraq and Central Asian republics. Demand in those markets is expected to dictate the market performance in the UAE.

Industry experts say that due to lower consumer spending, the automobile market is right behind the real estate sector to witness a slowdown, as the global financial meltdown begins to bite.

Inam Saleem, managing-director of Prestige Car Care, a dealer in used cars, stressed on the importance of the local market to global manufacturers. "The UAE has been a test market and a launch pad for many car manufacturers," he said.

In trouble

He added that with major automobile companies in the US in trouble, used car sales for their brands would be reduced. "No body would be willing a to buy a car when the manufacturer would not be around for long."

Mohammad Redha Ansarali, managing director of Deals on Wheels, a used-car dealer within the Al Aweer used car market, told Gulf News that 'need' is in the driver's seat and 'want' has taken the backseat. "Only those who need cars are buying now," he said.

As a result, high-end luxury car sales are witnessing a slump. "I would sell four to five Rolls-Royce in a months, now the number is down to one," Ansarali said.

Shift

Ansarali also said that there is a shift in demand. Buyers are not looking at specific brands so much as this point.

"Buyers are becoming more cautious of spending. If they really need a care, they would buy something that fits their budget," he added.

Ansarali said that currently, dealers that offer attractive finance packages would see their sales increase.

On a positive note, he said that now is a good time to buy. "There is a flood of stock and the prices are cheap as well," said Ansarali.

Additionally, a used-car salesperson at a German dealer said the depreciation of the euro and the current market slump is badly affecting their sales. Prices are down five to ten per cent across the board, he said.

Meanwhile, Saleem told Gulf News that the right-hand auto market in Dubai is "dying".

Re-exports to Central European countries and Africa are slowing down as "African ports perform well," he said.

With the developments taking place in those countries and facilities now made available, people are approaching the US and Japanese markets directly for used car supply. Previously, Dubai was the main market for them.

"Supply to markets in the Central Asian bloc was high at one point, but it has slowed down significantly now," said Saleem.

Forecast: Numbers to fall

The total number of cars in the UAE today is about 1.85 million, considered to be one of the highest numbers per capita. The ratio in Dubai is calculated at 541 cars to every 1,000 people, the highest in the country.

Experts say this number will change in the coming years, especially once the Dubai Metro starts operating and the Roads and Transport Authority tightens rules to obtain a driver's licence and makes car ownership expensive by increasing registration and renewal fees and adding toll gates.