Easier financing adds horsepower to car sales as consumerism rises

Dubai: Cars are once again starting to move in the right direction — out of the showrooms and onto UAE roads. New vehicle sales in the last quarter of 2010 and the first few weeks of the new year indicate that the turnaround for the local automotive sector is well under way.

Nowhere is this more apparent than in the entry and mid-sized categories, which given the kind of volumes they account for — estimated at 80 per cent and more of total car sales in the country — annually are the bellwether for the industry. And the upturn is being noticed across the board, irrespective of the brand or its origin.

"Our December year-to-date figures indicate our sales are up 33 per cent year-on-year showing we had healthy demand for our cars rather than any slowdown in 2010," said Hugh Dickerson, senior general manager for sales and marketing at Al Futtaim Motors, the agency for Toyota. Its latest numbers place sales of the Yaris, Corolla and Camry as being up 28 per cent over last year.

"Our expectations for 2011, based on last year's experience, [are that] continued growth is likely."

The entry and mid-tier categories had to face the brunt of the loss in consumer confidence following the downturn. Further distorting the pitch for new car sales was the competition posed by the Metro and the impact of the multiple fuel hikes in recent months.

These factors combined led vehicle owners to hold back from new purchases, a trend that was very much there right into the first-half of last year as well. But since last summer, customers seem to have changed their mindsets, no doubt influenced by signs of improvement in the economy.

"Then again, consumers may have just had enough of being pessimistic about prospects, both individual and for the market as a whole," said Samar Roy, managing director at Al Naboodah Commercial Group, which represents Peugeot. "At some point, they may felt the time was opportune to get back to buying — no one can go on being gloomy forever, can they?

"The latest sales and shipment figures of the leading Japanese manufacturers indicate demand is definitely on the upswing. It looks set to continue right through this year."

Buying trend

Helping their cause — and of the dealerships — was the easing of credit to finance new car purchases. Again, this trend is of recent vintage, becoming more noticeable since the second half of last year. Dealerships are doing their bit to ensure the whole financing process can run as smoothly as possible.

"Honda has a panel of 12 banking partners, covering the largest UAE auto funding specialists," said Mark Kass, managing director at Trading Enterprises, which represents Honda.

"Our partners' credit policies help us to approve loans to over 90 per cent of our customers. We continually explore innovative offers to our mutual customers, including payment holidays, low rate financing, nil down payment and low starting EMI facilities."

The chances of an increase in interest rates seem unlikely in the near term, which would mean that auto loans should go on carrying the same costs for buyers.

Meanwhile, on the inventory side, local dealerships have gone through the reworking brought on by the sharp drop in sales during 2009 and early 2010. According to Kass, "We learnt our lesson post the financial crisis in December 2008, whereby inventory management is closely monitored month-on-month versus sales, and orders are adjusted accordingly. We successfully managed expectations and carried a small number of 2010 model year stock units into 2011."

Dickerson echoes a similar sentiment on the action taken. "Like all dealers in the region and the world, we too had some backlog early in 2009, but our inventory has long since been exactly where we want it. The current inventory comprises 2011 models right across our entire range."

Keeping momentum

In short, the start of 2011 sees the local automotive sector in a much better place. All that needs to keep the momentum going is to have new model launches coming through thick and fast.

"It's no coincidence that auto sales are improving in all of the key markets, including the US," said Roy. "The UAE's auto sector can expect the smooth run to continue provided that bank financing is readily available on tap for buyers."

New warranty attracts

The "five-year warranty" that some of the leading dealerships have on offer has found a lot of purchase with buyers making a hesitant return to the showrooms. And dealerships know they are on to a good thing.

"Our five-year, unlimited mileage warranty demonstrates our confidence in the product range," said Hugh Dickerson of Al-Futtaim Motors. "Our commitment is to drive down cost of ownership in the UAE and to offer the best value for money. We are doing just that and our customers love it."

The market is swirling with competitive offers, each of which seem to promise buyers something extra. With the Dubai Shopping Festival approaching, buyers can look to some aggressive manoeuvres from dealerships seeking a profile for their models.