Shift in gear likely in car sales amid rising challenges

Dubai: The current global crisis has crept into the auto industry in the UAE even though most dealers have seen high sales during the first half of the year, industry sources say.

Car sales in the UAE increased 37 per cent in the first half of 2008, according to the Business Monitor International (BMI), while statistics from Middle East Automobile Council reveal that the total sales in the Gulf Cooperation Council (GCC) countries were up 26 per cent.

The sales forecast by the industry researcher saw an upward adjustment due to the strong performance in the UAE auto industry, although the rise was somewhat dampened by a decline in the country's overall economic and political risk rating, they said.

James Crichton, sales and marketing director, BMW group Middle East, told Gulf News that they are facing several challenges at the moment. "The currency fluctuation, especially in the first nine months of this year, the price increase of raw materials and the financial crisis are all having an affect on the automotive industry," he said.

Forecast

Crichton expects 2009 to be challenging and the company will work closely with importers to invest in all areas of business to make sure their product offering continues to meet the highest standards.

Last year's growth of 12 per cent in the car market will see a decrease by five per cent, according to market reports. Luxury car sales led sales in 2007, while non-premium brand sales grew by eight per cent, with European brands facing pressure due to the appreciation of the euro against the US dollar.

Next year, analysts expect European brands to have an edge as the euro continues to depreciate.

Arijit Basu, Honda's assistant general manager, Middle East, told Gulf News, "Since November, we have felt changes in the market with banks becoming more tight-fisted."

He said the time and process to obtain loans has also increased. "More than 85 per cent of our customers take loans and this is a cause of concern."

Despite this, the company would not want to "over-stimulate sales with excessive incentives, since the excessive discount may result in the depreciation of the value of used cars".