Dubai: The UAE’s car dealerships have reached a point where they no longer can afford to offer more discounts on new sales, according to a senior industry source. Further cuts will only make an eventual recovery that much more difficult, with 2021 model year vehicles starting to arrive at local showrooms.
“Everyone agrees about prices not being allowed to drop further,” said K. Rajaram, CEO of Al Nabooda Automobiles, the Porsche and Audi dealership. “But everyone needs to stick to the consensus – it shouldn’t get over the moment everyone steps outside of the room.”
Based on industry estimates, ex-showroom prices of popular models have seen a 5-15 per cent dip from a year ago, as dealerships try to win buyers in the most difficult market environment since 2009. Their hopes were kindled by a slight pickup in demand during the Eid promotions, but that didn’t last soon. Now, the next six weeks or so will be critical to drum up some demand and clear the showrooms of older stocks.
This is why, in recent days, the market has been talking about some dealerships again bringing back their discount playbook. UAE new car sales could close this year at just over the 200,000 unit mark, after experiencing a 30 per cent decline.
According to Rajaram, “Car manufacturers have already sacrificed their margins on 2021 model year launches, and individual dealerships are doing their bit to come up with a price that buyers can get comfortable with.
“But discounts start when some dealers find they are overstocked on some models and want to liquidate them at the earliest. But it only hurts the market for everyone.”
Recently, the auto industry grouping under Dubai Chamber has been active in trying to come up with solutions that can see it through this downturn. The group has been clear about one detail – excessive discounting is not the answer.
Another dent on hopes
With lockdowns back in place in the UK and elsewhere in Europe, the ramifications for the auto retail market is immediate. This is the time of the year when the major fleet orders come in from the tourism and hospitality sectors.
Rajaram says negotiations on a few potential deals will be delayed with the latest travel restrictions in Europe. “We will know the consequences next week itself – such an important tourist sourcing market as the UK shutting down will have an immediate impact here,” the CEO added. “I am hoping that the situation in Europe only delays fleet orders… and not stop them in their tracks altogether.
“At least, that’s the hope.”
Signs of stabilising
Industry sources are not talking about growth for the moment. Their only focus is to see whether demand will stabilise at current levels. Rajaram can resonate with those sentiments: “If 180 unit sales was the daily average, the market’s doing about 100 now. The key takeaway is that it’s not dropping any further.
“After what all the dealerships experienced in the April to June phase, this is much needed stability. No one will be holding 2019 model year vehicles in their inventory – unlike in 2009 when all of us carried unsold stocks. Now, there’s the steady trickle of demand – it could have even been better if not for the second lockdowns in Europe and the travel restrictions.”