Stock - Car Buying
Demand for new - and secondhand - cars is running so far ahead of supply coming into dealer showrooms in the UAE. Now, dealerships are hoping things will improve on the supply side by end of this year. Image Credit: Shutterstock

Dubai: Buying a new car in the UAE now comes with something owners have never experienced before – a long wait to actually get it. What used to be a month or two waiting period on the more popular models is stretching well beyond that. And when it comes to luxury models and SUVs, the waiting can last a few months.

At the start of the year, UAE dealerships had been optimistic that delivery times and stocks in hand would get better by summer. That, by the looks of it, is not happening, and which has prompted dealers to revise their expectations to year-end for the situation to improve.

All this when demand for new cars is hitting 15-20 per cent levels from a year ago – and double what it was during 2020, when COVID-19 and the lockdown phase dented demand. At the time, dealers felt the impact would take years to repair – but that’s not how it’s been playing out as buyers started to return from the second-half of 2021. Only to find there aren’t enough cars to buy.

All about ships and chips

Production cuts in 2020 by all carmakers meant that supply was always going to play catch up to demand. It was also the time that carmakers got hit with an acute computer chip shortage (this became a problem for just about every hi-tech industry). Now, when a car manufacturer had enough production to offer, they found buying space on ships was at astronomical levels.

“It is our expectation deliveries will start to stabilize and that Q4-2022 will be better,” said K. Rajaram, CEO of Al Nabooda Automobiles, the local retailer for Porsche, Audi and VW. “However, the issue of shipping logistics still remains.”

Stock - K. Rajaram of Al Nabooda Automobiles
K. Rajaram of Al Nabooda Automobiles: "Currently, used car sales are doing better because of the non-availability of enough new car stock..." Image Credit: Supplied

Higher shipping costs have left their imprint on 2022-23 model year car prices. On average, “,” said . “The waiting period for new cars has increased and they are charging a premium” for speeding up deliveries.

Vishal Pandey

There has been a 5-7 per cent increase in new car prices, mainly due to chip shortages and supply chain issues. The waiting period for new cars has increased and they are charging a premium for speeding up deliveries

- Vishal Pandey, Director at Glasgow Research & Consulting

Other industry sources say that new car prices – as well as of secondhand options – have risen by as much as 10-15 per cent in these 12 months. Prospective buyers can expect more increases when the 2023 MY vehicles hit showrooms from September, with the recent gains in dollar’s value adding another layer to car prices.

Buy secondhand?

That’s the other big trend the UAE’s auto market is witness to – the rise and rise in demand for pre-owned. New dealers are entering the market, including that operate only through as online platforms buying and selling used cars.

Because there are many who want to get a new set of wheels now rather than wait three- to six- months, demand for pre-owned has seen some heavy activity in the first-half of this year. Buyers are getting their chosen cars within “one week to 15 days depending on the loan approval/financing bit,” said Pandey. If it is “cash upfront, the process is faster in about three days.”

Even then, “as there is no stock in the market, even secondhand dealers are securing stock from the grey market and that is being sold at a premium.”

According to Abhinav Gupta of Cars24, which last year engaged in the biggest commercial property transaction in Dubai for a secondhand car facility, "There has been a mindset shift among car buyers and who are looking for a certified (used) car that is absolute value for money. The other key reason for this resurgence in demand is because of the influx of expatriates into the UAE after the Expo.

Abhinav Gupta

These newcomers want to be on the move as soon as possible once they get their license. With pre-owned cars, they can buy with a straight forward cash payment and don’t have to wait six months for loan eligibility. We strongly believe that this trend will continue as we move into 2023.

- Abhinav Gupta of Cars24

Car sales, servicing go ‘digital’

It may have taken time compared to other retail sectors, but UAE’s auto market is now feeling the full force of digital. The process of buying and selling vehicles has already started to make a shift, and the market is starting to see startups emerge where even the booking and servicing is done through an online portal.

“The digital shift is an extension to what’s been happening with ride-hailing (Careem/Uber), pay-per-kilometre leasing (ekar and Udrive),” said the CEO of a leading dealership. “The UAE car market has gone digital – only the pace will pick up.”

Stock - Car Buying
UAE car buyers are getting comfortable with making a deal on their next car via an app. Now, businesses are launching that want to do the same with the servicing and after-sales side of things.

According to Rajaram, legacy dealerships are not going to get too concerned about the wave of secondhand car sales businesses opening in the UAE. “Since there is a shortage in the market, there is plenty of room for everybody,” he added. “There is no great difference because we also sell digitally.

“But these nearly-new secondhand vehicles do not confirm to local laws and specs. We have taken up this matter with the authorities.”

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Abuzz with activity is the Cars24 facility in Jebel Ali Free Zone. Image Credit: Supplied