Hidden realities of the auto boom (page 2 of 2)

The UAE accounted for another 80,000 sales.

Fleet sales have come down hard, partially in response to reduced tourist traffic in the region since September 11th. In a good year, fleet sales account for up to 40 percent of overall sales in the sector. "I have not seen the fleet operators hitting the markets as they usually do at this time of the year," says the marketing manager for the Japanese car dealer in the Gulf. "Many have rescinded on placed orders. We estimate that we may have to sit out the year without the usual heavy backup from fleet sales."

Clearly, automobiles is not the only sector feeling the pinch. Overall retail sentiments have taken a jolt from factors such as lower oil revenues, shrinking job prospects for expatriates and general concerns about the short- and medium-term future of the region. As a result, Gulf car owners are holding onto their older models for longer than they - or the manufacturers and dealerships - would like.

For their part, some American carmakers say that they have detected a new undercurrent of resentment against US goods in certain markets. While not significant in overall terms, this trend is nevertheless worrying. "The anti-American sentiment has not been overt, but we have had reports about its rise from our local dealers based on their own market feedback," says a manager with a major US automaker.

A senior manager at a Japanese brand insists that, politics aside, the Americans simply do not have a strong presence in the regional market. "In the Middle East, it is certainly not the US makes that are in control of the industry. Japanese brands easily make up 50 percent or more of each of the individual Gulf markets. And even with tight market conditions, Japanese manufacturers are in line to increase their market share on the back of strong model offerings and a very good yen-dollar situation."

Japanese, American, German or Korean - all of the world's automakers face real challenges in the Gulf. And there's no road map for success. In their bid to increase sales, one option is promotions and lower prices. But if profits matter most, then Gulf consumers may find, sooner rather than later, that regional car dealers are ready to drive a very hard bargain.