Dubai: Guess who’s fuelling a boom for the car rental - and subscription – business in the UAE these days? The growing numbers of new residents in the country, who for the initial months, at least, prefer to rent/subscribe their set of wheels rather than buy.
Plus, more companies are offering the perks of a leased car along with other benefits in the package, done with the intent to offset what inflation costs would have on the individual’s take home. “For a certain type of employer, offering a car is now standard for their mid- to senior appointments,” said the head of a recruitment firm. (Also, more job contracts are seeing increased contributions by the employer to the cost-of-living allowance and for rents too.)
Whatever be the case, the profile of those renting a car through digital portals or the physical leasing firm is changing. Nicholas Watson, CEO and co-founder of rent-on-demand platform Udrive can vouch for that.
“The most increased usage has been in the larger vehicle segment such as SUVs and family vehicles primarily driven by more new arrivals to the country,” said Watson. “While the resident user base of our service is the largest, we are also seeing more demand from business tourists and ‘transients’, people coming for extended stays.
“Our average usage is 85 per cent residents and 15 per cent tourists. We are seeing this move to 80:20. As we continue to add vehicles, we expect to see more availability of vehicles for non-residents over the remainder of the year.”
Denting new car sales
Time was when new car dealerships had the pulse on brand new expats in the country. And buying a car was – if they had the budget – among the first things these newcomers would go through as soon as they had the license. Not anymore.
“The buyer profile is changing, and we are seeing increases in the numbers who just want rent a car or become monthly subscribers (and with the option to change their cars),” said the CEO of a leading dealership in Dubai. “It’s not just among the young - there is less inclination to buy new even among older demographics.
“These days, no dealership can be without a strong used-car operations or have rental or subscription services.”
When it comes to luxury models, the price gap has narrowed even further, industry sources say. In such a scenario, potential new car buyers are playing the waiting game for prices to cool down.
Until then, renting or subscribing to a car is OK. If their employers helps with providing a leased car, even better.
10% growth
For now, new car sales in the UAE is taking care of itself. Year-on-year increases are pegged at 10 per cent or more, but more dealerships say it’s unlikely that growth will head into the 20 per cent and more range, which was seen in the early part of the last 10 years.
“Owning a car isn’t just about buying it - there is insurance, parking fuel, maintenance, damage and depreciation that all need to be factored in,” said Watson. “Unless you are driving for over 1.5-2 hours a day, owning a car really doesn’t make sense.
“It essentially becomes a disposable income discussion. Hardly anyone buys DVDs and Microsoft Office CDs anymore — it’s all on-demand and subscription-based, driven by technological innovation.”
Point taken.
Rental rates too are gaining
But car rental rates too have been on the march. Operators cite the rise in car prices since late 2020 as the main reason. Businesses have to pass on the costs to the consumer, and this is what has happened.
“Your average economy sedan has increased from Dh38,000 to Dh48,000 over the last 12 months,” said Watson. “As leases are a big cost driver, it impacts the rental price per minute or daily.”
Rates have ‘stabilised’
Soham Shah, CEO of Selfdrive.ae, has a different view on rental tariffs. He says the surge in lease rates primarily took place during the Expo phase and immediately after. Plus, there was the global shortage in chip availability and which hit carmakers on the production side.
"That created extreme vehicle short supply, and as a result, overall vehicle costs reached its peak," said Shah. "However, since Q1-23 this has undergone a correction."
“Considering that there has been an increase in interest rates, the market has witnessed reduced demand for cars. This will ultimately lead to more availability with rental fleets. “As the market corrects, customers can expect to see a decrease in rental and subscription costs.”
Selfdrive.ae partners directly with manufacturers, dealerships, and leasing companies in the GCC. Its app thus provide users with access to a range of vehicles and lease options. “Our platform has seen renewed demand for flexible and affordable mobility,” said Shah. “By offering a range of subscription and leasing options, we are able to provide users with a more cost-effective alternative to traditional vehicle ownership.”
