Worst may be over for Dubai car sales (page 1 of 2)

Auto sales have slumped across the globe, especially in Europe, where sales of new cars have fallen for thirteen straight months through the month of May.

One indicator of the drop in new car sales in Dubai is the sharp decline that has occurred in the number of new registered vehicles in the emirate during the first six months of 2009 compared to the same period last year.

'We have witnessed a decrease in the growth of the number of new vehicle registrations, which was 4.5%, compared to 17% last year,' said Ahmad Behroozian, head of the licensing agency of the Dubai Roads and Transport Authority.

He noted that the number of vehicles registered in Dubai reached 1.045 million at the end of 2008 compared to 853,827 in 2007 - an increase of 191,173 vehicles in one year. 'But this year the number of new vehicle registrations has fallen due to the economic downturn,' he said.

Sales 'tank' in February
Sales have been slow for all types of cars, including luxury vehicles, due to the credit crisis, said Pankaj Dev, managing director of AutoMiddleEast.com an industry analysis firm. 'People still aspire to buy these cars, but the availability of money has become tighter,' he said.

Sales began to 'tank' in February, he noted, but in the second quarter things started to improve as banks started lending again. Yet banks are still being very choosy about who they will finance and on what terms, he added.

Dev expects sales to take a dip toward the end of July but pick up again towards the end of August when Ramadan begins, as traditionally it is a high sales period. 'During the holy month there are a lot of promotions, and it's considered to be an auspicious month to purchase cars,' he noted.

One trend that has emerged during the financial slowdown is that the market for used luxury cars has jumped as high as 50% over the same period last year mainly due the substantial drop in the resale value of high-end vehicles, he said.

And while it is true that there has been some distressed selling by people who have lost their jobs and are leaving the country, the level of selling might not be as high as has been claimed in some of the news media. 'These reports were based on a lot of hearsay and bits and pieces, but the government has clearly come out and said these numbers are not correct, and there is no way to cross verify and get a complete picture of what is going on,' he said.

Price discounts

To help boost sales when demand started to suffer, dealers in Dubai initially offered price discounts, but now they are focusing on other types of incentives such as longer warranties, free registration, and free insurance.

Some dealers are even offering trimmed down versions of their vehicles to appeal to consumers that are more price-conscious. 'Toyota came out with what they called limited edition sports models, which were stripped down versions - lower in price - and put them out in the showroom as a parallel product line,' he said.

Dealers want to avoid lowering prices for a variety of reasons, not the least of which is it's hard to raise them again, he said. 'Also, the person who just purchased the car the previous month feels cheated, and he'll lose confidence in your brand. Thirdly, if you cut your price by say 10%, it will hit your price on the resale market by much more than that. So you are hitting yourself on two ends,' Dev noted.

For these reasons, and because there are have been signs that the financial crisis may have bottomed out, car prices will not go down any further, Dev predicted.