I just got a driver’s licence, can I rent a car?
Right now, there are more car buyers in the UAE preferring smaller cars to keep a firm grip on their payments. As buyers become ever more conscious on cost of ownership, dealerships will have to make the right responses, says Michel Ayat, who heads the Dubai Auto Dealers Group. Image Credit: Shutterstock

Dubai: Car dealerships in the UAE will ensure only marginal price increases on 2023 model-year launches in the coming weeks, and not put off any buyers worried about costs and inflation.

Increases would be limited to ‘1-3 per cent’ on the most popular MY23 models, with the higher-end vehicles likely to see more. More than anything else, dealerships want to keep the 12-month upturn in new car sales going, even if that means they – and the car manufacturers – have to absorb some of the higher cost of production.

“Everyone talks about semi-conductor chip shortages and shipping costs driving up car prices,” said Michel Ayat, CEO of AWR Automotive, the Nissan, Infiniti and Renault dealership. “What they don’t realise is that today’s buyers want to have sensors, cameras and lane-change warnings even on the smaller cars. And adding those smart devices costs a lot more.

“For the next model year, the plan is to limit any price increase for car buyers to the bare minimum. In our case, 1-3 per cent.”

Other dealers too are inclined to think on these lines. “Minimal increase on ex-showroom prices and throw in as many freebies as possible – because we are seeing more cost-conscious buyers turning at the showrooms,” said a dealer. “Everyone’s calculating how they can reduce their monthly instalments.”

More clarity on car shipments

By early next year, global carmakers should have resolved the problem on chip shortages, according to Ayat. The festering issue on semiconductors meant that on a majority of models, car buyers in the UAE have had to wait even months for delivery on their confirmed orders. “With bestselling electric vehicles, it’s even been longer – six months on average,” said Ayat, who is also the head of the Dubai Auto Dealers Group.

“We will see a 28 per cent improvement in shipments in Q4-22 and 100 per cent in the next year. The delay – by an average 1-3 months – on new model handovers has been stalling growth in the UAE’s new car sales – it’s time this problem gets resolved once and for all.”

H1-22’s good run

Even with all the shortages in showrooms and delivery delays, new car sales did do well in the first six months. “The UAE market recorded 104,060 in unit sales, and that’s a good 12.3 per cent over last year’s 92,600,” said Ayat. “What’s interesting is that the share of Japanese made brands recorded an even greater increase – by 12.9 per cent – to 78,252 cars sold.

“The share of European brands shrunk, even though the euro was much weaker and that would meant prices too should have dipped. For US car brands, the decline was 5.6 per cent during this period.

“We need to look beyond just these numbers – consumers are changing and who would have thought that sales of second-hand cars would be running neck-to-neck with new ones in the UAE? That’s exactly what’s happening now.”