Dubai: ‘Saving money’ is shaping up to be the next big driver of used-car sales in the UAE and Gulf, as consumers weigh the costs of buying a brand new one vs. pre-owned. If more vehicle buyers choose the latter option, 2023 has all the makings for a bumper run.
“It’s the point where consumers are getting really concerned about balancing their payments,” said Marwan Chaar, Co-Chief Executive of Kavak GCC. “It’s that moment where these consumers are having thoughts about their new car purchase value dropping 20 per cent (in depreciation) the moment they turn the car key.
“Covid created the heightened demand for car ownership in the UAE/Gulf, including used cars, and that’s what we have seen in these two years. In 2023, the big global/regional macro trends too will have a part to play.”
Will prices dip?
Auto market sources also reckon there could some dip in used car prices on the more popular models, especially mid- to high-end sedans. (But don’t expect much of a dip on premium models, or the most in-demand EV/hybrids. Even SUV prices are unlikely to see much change.)
Car sales hit the speed button
The Gulf’s automotive market is sporting a much different look than what was seen in 2019 when demand had seemingly hit a brick wall. Then when Covid came along, it was felt the region’s auto sales would take a year or two to get back to partial recovery.
This is where many got it wrong. Right from the last quarter of 2020, new and used car sales hit the speed button - and have remained stuck to it since. (There was also the lack of sufficient new car supplies that played a part in diverting demand for used ones. It took months for new cars to be handed over from the time they were ordered, as manufacturers battled supply issues and also a shortage of chips to power much of the onboard systems.) “New car availability is no longer much of an issue, but we believe that there are more factors that will keep adding to used car demand. There is the economic factor - if customers can save 20-, 30-, or 40 per cent, they will keep looking at these options.
“In Saudi Arabia, there is the additional element of more women wanting to drive and own cars. These are all factors that will come into play, more so now.”
New car sales in the UAE will close this year at comfortable double-digit levels. Much the same is happening in the used car volumes. In the latter, this period has also seen more digital platforms - like Kavak, Cars24 - taking up space in the used car landscape and scoring with the ‘everything through an app’ consumer base that is growing by the day.
“We are an omnichannel operator and we own the vehicles that we sell,” said Chaar. “Kavak is not a platform that connects a car buyer with a seller. We are also clearly not a used car trader that buys and sells everything that we see, including those involved in accidents.
“That means, we need to be sure of the cars we sell, and put them through multiple quality checks. We have between 400-500 cars at any given time, and we want to raise that to 1,000 in the next six months.”
New car shortages to continue?
Maher Aboud is CEO - Automotive at Dubai-based Ghassan Aboud Group. He believes that the shortage and lack of immediate availability of new models will continue to benefit used car operations for a few more months.
“This shortage of new vehicles is expected to continue until Q4-2023,” he said. “The shortage in the production of new cars, supply chain issues, and the consequent price increase have created a significant impact on supply-demand. As a result, demand for ‘nearly-used’ cars has grown multifold pushing up the prices.
“However, we expect a price softening in the used car market in the coming months.”
Prices did rise, fast
Automotive industry sources have been saying that in some cases, buyers were willing to pay even a premium on a ‘nearly used’ car, especially if it is a high-demand model and for which the waiting period on a new one extended to four-six months.
Waiting period ‘may be the case with luxury brand vehicles where global demand exceeded production levels as a result of the pandemic,” said Aboud. “We have not seen this trend in the lower brand categories due to relatively easier access to inventory.
“We source them locally, regionally, and internationally through our strong network of partners. Thereafter, we ship them around the world based on demand – we have a reach of more than 100 countries and offer end-to-end logistics.”
We are witnessing an increasing curiosity and demand for used EVs. However, the availability of preferred brands is not high relative to non-EV vehicles. As EVs penetrate the market more, demand for used EVs may gain traction
But the way demand is coming through, chances are most of the deliveries will be done in the UAE and GCC itself - 2023 has all the makings of another good year for used car buying and selling. Question is, will it be a record year?