Dubai: New car sales in the UAE could grow by another solid 10 per cent in 2023 – but many of these buyers could do with some help on the financing side. Especially in spreading out the payments after successive interest rate hikes pushed auto financing to around the 5 per cent mark from 3 per cent a year ago.
In getting the message across, car dealerships are talking to the banks and other lenders to try and lessen the payment burden. “We have many negotiations going on with the main lenders in the market,” said Suliman Al-Zaben, Director for Hyundai and Genesis brands at Dubai-based Juma Al Majid Est. “We have been putting it across to banks to reduce their indirect fees on car purchases.
“We are also trying to compensate car buyers in other ways, like offering a grace period on payments of 2-3 months.”
Key consumer-focussed sectors in the UAE are yet to see any marked slowdown because of the rate hikes to date, confirm industry sources. But with no clarity on how far the US Federal Reserve will go in more rate hikes this year, there is a concern here that at some point car buying could feel a dent in demand.
This is why offsetting buyer concerns on their EMI is becoming a primary focus for dealerships (and used-car sellers). Extended warranties are already part of their sales package, with some recent entrants into the car market even offering a 7-year, unlimited mileage one. The leading distributors, however, still stick with 1-3 year warranty runs.
No heavy discounts, please
In 2022, new car sales in UAE were at 10 per cent plus to push overall unit sales to go past 200,000 again. Such was the demand that dealerships felt there was less of a need to offer discounts, with buyers willing to wait weeks and months to take delivery of their models. (On super-luxury models with heavy customising, the waiting period would extend further.)
“A lot of buyers made their purchases or bookings in Q4-22 because they felt waiting longer for 2023 model year vehicles would mean having to pay higher interest rates,” said a dealer. “Unlike in the last two years, new car launches in the UAE have not seen major ex-showroom price increases.
“That’s a plus for consumers.”
Al-Zaben, meanwhile, does not see any immediate return of heavy discounting practices this year. “We could do added value discounts,” he said. “And I would expect to see different marketing activities from last year, but not to the extent of bringing back pre-Covid tactics such as heavy discounts.
“Distributors are suffering from high running costs as well, so to maintain this, they would need to maintain their prices.”
Not enough stocks - means fewer discounts
Dealers don’t have to discount either. Nearly all the key brand distributors are carrying limited stocks, and most of the upcoming arrivals have already been sold or will likely see a sale on touchdown at showrooms. (The global supply of new cars is still yet to see a full-fledged recovery to pre-2020 times, and the best guesstimate is that this could improve only towards the second-half of 2023.)
"We have seen some price cuts here and there, but nothing major," said Al Zaben. "And no one took advantage of that with the current shortage of supply. We are expecting more and higher demand in 2023."