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However, the tremendous growth in car sales that occurred in the UAE in recent years is now forecast to fall sharply in 2009.
Sales have been on a downward slide beginning in the fourth quarter of 2008, as lending tightened due to the credit crisis. General Motors, which reported sales growth of 28% in the first 10 months of 2008, said the rate of vehicle loan rejections in November had risen from 5% to up to 30% in the UAE, the report said.
It is no surprise that stricter lending requirements have impacted greatly on UAE auto sales as 70% of new car purchases in the country are made on credit. As the credit crunch continues with no clear end in sight, BMI predicts that annual growth in the UAE car market will slow to just 2.9% this year.
Sales are expected to remain sluggish in 2010, but BMI predicts that over the long-term the UAE market will rebound strongly, with double-digit growth in sales expected to resume from 2011.
By 2013, the UAE automotive market will have reached around 570,000 vehicle sales per annum, a 57% increase over 2008, BMI says.
Sales dry up
Car dealers admit that they have not been immune to the impact of the financial crisis. 'The UAE has not been spared from the effects of the global economic slowdown; nor the impact that the slowdown has had on the auto sector.
'We expected growth to slow down and the economic situation has certainly brought that home - perhaps a bit sooner than we would have liked,' said Yolanda Delport, General Manager for Marketing at Trading Enterprises, which owns Honda, Volvo, and Chrysler dealerships throughout the UAE.
She said the biggest challenge that dealers face is the lack of confidence among customers. 'We're still getting a healthy level of enquiries across our brands but people are slower in making the buying decision. When consumer confidence dips, people become more cautious and often drop into a holding pattern before making long term commitments,' she said.
Another challenge is the growing number of questionable offers that some dealers are making to attract customers. 'Open any newspaper and you will find advert after advert all offering 'special deals'. Our advice to customers is to make sure that they fully understand what the offer really is, and make sure it represents good value, rather than a discounted price ticket. The latter of course, can impact the residual value of the car,' she said.
Price focus
Tom Pryor, Marketing Manager for Ali and Sons Audi dealership in Abu Dhabi, agrees that customers are focused on price, and he acknowledges that he is losing business because people have an expectation that prices will keep falling.
But he is quick to point out that prices cannot keep falling forever. 'At the end of the day, we still have to be viable as a business. There is only a certain price point we can go to,' he noted.
Jeff Florian, Senior Reporter
