File picture of Michel Ayat, CEO of AWR Automotive. Parallel imports of cars brought into Dubai and sold are again increasing and that is dangerous for consumer safety, Ayat says. Image Credit: Atiq-Ur-Rehman/Gulf News

Dubai: Dubai is to crack down on the “parallel imports” of new cars brought in from some of the neighbouring countries and sold here, usually at steep discounts compared to ex-showroom prices at local dealerships. The problem has escalated in recent months as dealers in those countries try to do anything possible to liquidate their stocks amidst falling demand in their home markets.

“Most of such sales are happening through showrooms in Al Aweer - the Dubai Government is aware of the issue and considering new laws to tackle this,” said Michel Ayat, CEO of AWR Automotive, the local Nissan and Renault dealer, and who now heads the recently revived Dubai Car Dealership Group.

“Many of these cars brought in from neighbouring markets have 0 mileage on them - but none have gone through the stringent third-party inspection and testing at the local level. Today’s vehicles have some of the most advanced electronics on board - can buyers be absolutely sure these would work at all times without the pre-sale inspection being done?”

A legacy problem

Through the 1980’s and 1990’s, parallel - or “grey” - imports were a constant source of irritation for leading local distributors, Most of these would come in via Buraimi in Oman and find willing buyers because of the sort of straight discounts the sellers could offer. But in the last decade or so, such “imports” had come down significantly as car manufacturers kept a tight check shipments they made to those dealerships. Poaching in other territories was actively frowned upon... and it worked. Until now.

Since 2015, new car sales in all of the Gulf markets have taken a significant hit, and some of the dealerships/importers are now carrying higher levels of unsold stock.

“And because Dubai is a hub market, they try to push those stocks here - Al Aweer/Ducamz is now a source point for such deliveries and sales.”

According to a senior industry source, Dubai's auto market always had to deal with parallel imports; only the intensity keeps changing. "When 50 per cent of new car volumes in the region get wiped out, a lot of dealers/importers are left carrying too many unsold cars. The only way out is to dump them in Dubai/UAE because of our hub status.

"Dubai/UAE dealers have been meeting Ministry of Economy officials to make their case for tougher regulations and seek territorial protection. Millions are spent on showrooms and support facilities - those investments need to be protected against cheap imports.

"As such, the Al Aweer facility is earmarked specifically for used car sales - selling 0 mileage vehicles there is not the right thing."  

Ways to tackle

There will always be buyers willing to overlook the need for inspection clearance at the local level if the price is right. At a time when consumers are wary about their discretionary spending - and a new car purchase definitely falls within that - they would be willing to check options where are getting a steep discount straight out. These could be 15-20 per cent off the local sticker price on average, and even more depending on how desperate the seller is to close a sale.

But local dealerships believe they can make a convincing case against such sales using the safety argument. And they do have a point.

“Whenever a car recall campaign is initiated, we won’t find any record of cars bought through parallel imports,” said Ayat. “We don’t have any record of the customers who are buying... and these can be dangerous where safety is concerned.

“That’s why, the Car Dealership Group is working with the Dubai Government to come up with the laws to confront this head on.”

The Group, which comes under the aegis of Dubai Chamber, has seven dealerships that together represent more than 80 per cent of new car sales that take place in the emirate.

“Local dealers have to act as a team - the challenges are way too high to tackle individually,” said Ayat. “It’s a good thing the group has been revived after some years. We meet once a month and we’ve found there are many things in common when it comes to challenges. But first, we will take on parallel imports.”