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Even with higher showroom prices, UAE new car sales drove up some solid growth in 2021-22. How will this year turn out to be ? Image Credit: Shutterstock

Dubai: New car buyers in the UAE will have reasons to feel relieved - new models are not seeing the higher prices that were there with 2021 and 2022 launches, according to top officials with leading dealerships.

If there are increases this year, it’s mostly on the luxury models (and buyers of these are not the sort who worry about sticker prices).

“From what we have seen so far on the popular 2023 Model Year vehicles, we are not seeing price increases,” said Michel Ayat, who heads the Dubai Automotive Dealerships Group and is CEO of Arabian Automobiles, the local Nissan, Infiniti and Renault dealerships.

Stock - Michel Ayat
“2023 is turning into a good time to buy a car in the UAE,” said Michel Ayat of Arabian Automobiles

After seeing 10-30 per cent price rises (depending on your choice of model), UAE’s new car buyers will take all the price stability they can get. (Along with the extended warranty, free insurance and all the other incentives dealerships can throw in.)

Car financing is where costs have shot up All of this matters because there are signs of consumers in the UAE becoming more cautious about what they spend. The successive rate hikes the US Federal Reserve has brought in - and matched locally - have led to quite a sharp rise in car financing costs for the buyer. Dealerships are compensating by extending warranties where possible, or on the insurance side.

Reason for prices holding

What has happened is that the cost of shipping has come down significantly from what they were in 2021 and first-half of 2022, and that’s been a significant help in ensuring 2023 showroom prices have remained in check. Whether it’s from the Far East, Europe or elsewhere, shipments are regular and come in at a lower cost for dealers.

And that’s being passed on.

A second reason, according to dealers, is the strength of the dollar (and the dirham with it) against major currencies for the better part of 2022. “Dollar power helped us reduce shipping costs by 5-10 per cent in the third and fourth quarters of 2022, and it’s still there now,” said an official with an Abu Dhabi-based dealership. “If new car buyers are comparing prices last year to now, they will see they are gaining from the dollar.”

Car availability

Car dealers and manufacturers are also confident that another problem from 2021-22 will have cleared by later this year - of new cars being available immediately for the buyer. “Latest by the second-half of 2023, buyers can drive off with their new cars within one-, two- or three weeks of placing the order,” said Ayat. “Car manufacturers are confident that semi-conductor chips will be readily available and there will no longer be the production lags.

“When that happens, dealers can promise immediate delivery to buyers and have enough stocks of the popular models.”

Shortages of semiconductors - needed extensively in today’s feature-heavy models - meant that new buyers could get their cars after waiting for months in these last two years. (The situation still exists for premium and luxury cars.)

Price rise - not an issue for UAE car sales

Even with higher selling prices, UAE auto market did quite well for itself in 2021-22. It became one of the first consumer categories to show robust growth after the year of Covid disruptions in 2020. As with most consumer trends in the UAE, the premium car market was the first to recover in 2021 and then soon followed by demand across all categories. Sales of SUVs outstripped sedans for the first time during this period.

All this while the cost of buying a new car was higher - and with owners having to wait longer to get their choice delivered.

“We reckon that UAE new car sales hit 191,000 units in 2021 and then to 211,000 last year,” said Ayat. “We expect a similar growth in 2023, which should mean a tally of 235,000 cars sold. That will be good.”