Dubai: Anyone thinking of buying a new car in the UAE won’t have to worry about one detail – a sharp price increase compared to last year.
Despite shipping costs having shot up by around 30 per cent from a year ago – and chances are these will go further up – dealerships in the country are holding back from passing it on to new car buyers. Across the board, dealerships and car manufacturers believe they will be better off holding showroom prices at 2020 levels and give a chance for the industry to recover.
“For 2022 MY (model year), there will not be an increase because of the shipping charges,” said Michel Ayat, CEO of AWR Automotive, the dealership for Nissan, Infiniti and Renault. “This is the case at our showrooms and those operated by other brands/dealers. We launched new models of the (Nissan) Patrol Nismo and KICKS without needs to increase or modify prices.
“The UAE auto market needs time to recover from the pandemic – and everything will be done on our part to speed it up,” said Ayat, who also heads the auto dealership grouping under Dubai Chamber.
Across industries and businesses here, shipping costs are starting to become a problem. Construction and real estate are already affected, and costs have started to increase on imported consumer goods. But by holding the line, UAE car dealers clearly want to give consumers the confidence to go and buy a new car - and not worry about paying more.
A more confident consumer – and dealer
There are enough and more signs that new car sales – and used ones too – are making a gradual recovery from whatever happened in 2020. Demand for new models were down 31 per cent over 2019 as showrooms remained closed during a good chunk of first-half 2020. Once showrooms opened again, there was no immediate rush on the part of consumers here to try out and buy a new model.
It is only since March or April this year that sales picked up, and offering dealerships some much needed relief. Most important, “it was nowhere near as bad as in 2009 after the Global Financial Crisis, when the market plunged 40 per cent,” said Ayat. “The Government came up with many support initiatives to help out consumers and businesses. Plus, there was solid collaboration with car manufacturers – and this meant none of the dealerships here were carrying too much of stocks.
“But just as important, all of us dealerships have learnt all that we needed to know from the last five years.”
Ayat was alluding to a tough five-year phase from 2015’s all-time sales high of 420,000 new cars sold to 165,185 units in 2020. “That was an eye-opener for all of us and forced us to make changes to how we went about selling cars,” he added.
“We consolidated the operating expenditure and we are learning how to sell cars online. The pandemic has taught us more – it’s not the same customer out there anymore and the selling processes too will not be the same.”
Shrink the showroom
One change that will accompany the pandemic will take longer to shape up. That has to do with the size of car showrooms in the UAE. The next-gen showrooms will be smaller, and Ayat is quite fine with that.
“For any major dealer, there are four to six models that make up 80 per cent of his sales,” he said. “To accommodate that, we will need nothing more than 500-1,000 square metres for those few models.
“What we see right now are multiples of this – and the cost of operating these showrooms and maintaining them are massive. Operating margins will change accordingly.”
Already, some of that change will be visible. The first attempts at bringing automotive retail to malls are happening, while luxury carmakers have already experimented with ‘experience centres’ where there is just one or two models on display and the rest of the space is given to extolling the brands’ virtues.
“As for every business, change is a must and more change is coming,” said Ayat. “The auto industry has been lucky because for 50 years, selling cars was done in a certain way. And that was the only way. Then things started to get different from 2015 – by the time COVID-19 came, most dealerships had started making changes.
“We need to turn into strategists as well and not just remain retailers.”
Already selling online
Have UAE dealerships been a bit slow in trying their luck and sell online as well? Ayat dismisses the thought immediately. “If you look at Arabian Automobiles, we are already an online seller,” he said. “One-third of our retail sales, in fact, is happening this way and where the buyer comes to the showroom only to take the car. Everything changed in 2020.”
For UAE dealerships, the present will be about speeding up for the future. Michel Ayat, for one, is ready for that.