European carmakers feel the pinch

Dubai: European car manufacturers operating in the increasingly competitive GCC automarket are battling to cope with the shrinking value of the region's dollar-pegged currencies that makes their cars more expensive.

Numerous manufacturers who price their vehicles in euros or pounds - and their regional distributors - are resorting to trimming profit margins and operating costs in an effort to remain competitive with the US and Asian automakers.

The value of the UAE dirham alone has shrunk by 16 per cent to 20 per cent against currencies such as sterling, the Indian rupee and euro over the past two years, forcing the Central Bank Governor to hint at a potential change in the UAE's exchange rate policy.

For Europe's carmakers, whose sales are hugely outnumbered by Japanese manufacturers in the UAE and Saudi Arabia, a revaluation couldn't come soon enough.

"For sure we are all suffering. We have to reduce our profits in order to be more or less in line with the retail price of our cars. Our cars are more expensive to start with and are becoming even more so due to currency trends," said Umberto Maria Cini, area manager for the Middle East and Africa branch of Italian luxury sports car manufacturer Maserati.

"It's a big problem for all of us selling cars produced in Europe and we're trying to live with it. You have to just focus on your own business - bringing in the models and satisfying the customers," said Mohammad Bennani, managing director of Renault GCC.

According to Auto Strategies International, European manufacturers account for approximately 30 per cent of the passenger cars on UAE roads. Japan dominates the share with close to 60 per cent of 0-12 year-old vehicles in the country, while America stands at just 2.8 per cent.

In the trucks and buses category, where popular sports utility vehicles (SUVs) sit, European manufacturers have a roughly 10 per cent share. Japan dominates with 79 per cent of the market, while the US trails in second with 9.47 per cent.

Germany is Europe's best seller in the UAE's trucks and buses category, representing 5.38 per cent of the market.

Hans-Deiter Keller, managing director of Audi Volkswagen Middle East, said the company is considering shifting some of its production to the US to cope with recent currency trends.

"We will have to produce and buy parts in a dollar market... and have to reduce the complexity of our production methods to cut costs," he said.