Dubai: There’s a lot to thank Uber, Careem, ekar and udrive for. And not just for taking someone to and from their destinations in Dubai.
Sales to Uber/Careem operators (or “captains” in Careem-speak) and to those pay-by-the-minute car-hiring services such as ekar/udrive have propelled car sales in the UAE this year. Not just these entities, even government departments and taxi services have been active in placing orders for their fleet operations. And there’s still a few weeks to go to 2020… So much so, “for the first time, fleet sales have clearly overtaken new car sales to individuals in 2020,” said Michel Ayat. “I would even say, it’s at 60:40 in favour of fleet right now, whereas it used to be the other way round. But even last year, fleet-to-individual sales were running neck and neck.”
This year, overall new car sales in the UAE could be around 250,000-260,000 units, more or less unchanged from 2018. Of these sales, around 25 per cent end up in markets outside of the UAE, which has been the average through the years except during the 2009-11 Great Recession phase.
So, in what continued to be an exceptionally difficult environment for car sales, purchases by fleets are not just adding to the numbers.
For next year, the early forecasts for new car sales range from “flat growth” to a 3-5 per cent increase over 2019 if all goes well.
Uber and Careem (the separation is just a technicality since Uber acquired the local rival in March for a handsome $3.1 billion) are the most visible aspect of fleets in motion. At any point in time during the day (or night), an Uber/Careem limousine would be gliding through a neighbourhood in Dubai. The Lexus ES remains the vehicle of choice, but other dealerships are working overtime to make a grab for a piece of that action.
With the EXPO 2020 DUBAI now clear on the horizon, the Uber-Careem numbers are only going to go up. That’s exactly what dealers are betting on, as a recovery in sales to individuals could take longer to happen. “Bank lending to consumers have dropped by a few percentage points between 2015-19 and there’re still doubts many have about their job status,” said Ayat. “These factors are not conducive to a sudden increase in retail sales.”
More reasons for dealers to hope fleet demand will maintain its current strength.
By the minute
Another trend picking up speed is to lease vehicles and pay-by-the-minute. Cars bearing the ekar and udrive branding are starting to show up more frequently, as riders take to the pay-by-the-minute usage these platforms allow. (Currently, udrive is listing a Yaris lease at 70 fils a minute, which is also the same rate structure for a Sunny… and even a Mustang.) “We are starting to see a few on Dubai roads now - there’s a lot happening with mobility now and pay-by-the-minute services are all part of that deal,” said Karl Hamer, CEO of Adamas, the Lotus retailer. “Will it reduce new car sales to individuals? Unlike in other countries, I don’t think the UAE auto market will see a drastic cut in car ownership numbers. It’s more likely that people will have their own cars and use a Uber for specific trips.
“I see more of a co-existence of traditional and new forms of mobility.”
However, K. Rajaram, CEO of Al Nabooda Automobiles, reckons that such a co-existence could be difficult.
“The young do not want to buy - it’s definitely the case,” he said. “The kids do not want the bragging rights associated with owning a car. Ownership is a headache - they would rather call in a Uber and get picked up in five minutes.
“But we are interested in being part of the self-drive movement, through ekar and udrive. We have already provided 150-200 VWs to ekar, and they are also working with us on Porsche.
“And as of last week, we have had conversations with udrive - this is where the market’s headed.”
Local dealers are all headed in that direction.
Dubai Government agencies shift to leasing
Fleet orders have received a major boost from the many entities within Dubai Government.
“But from this year, major customers such as Dubai Municipality have shifted to leases rather than purchases,” said Suliman Alzaben, General Manager at Juma Al Majid Est., the Hyundai dealership. “For a dealership, this switch to leases - typically of four-year durations - don’t mean a drastic change in revenue flows.
“We have clearly mapped out the entire journey between placement of the lease order by the client to the “de-fleeting”, when the models end their leases. During this period, there are many ways dealers can optimise revenues by offering service and related support.
“The government orders are coming through for fleet upgrades and it’s been a busy year. The best part is that these requirements are only going to grow.
“Whether it’s sales or leases, the key is that cars are moving out of showrooms and dealer lots to end-users.”