Luxury car sales on record pace in Middle East

While talk of recession and belt-tightening dominate much of the business news headlines these days, luxury car sales are on the rebound in many parts of the world, especially in the Middle East.

German car maker Audi recently announced that it sold more vehicles in the Middle East in the first half of 2012 than in any other H1 since entering the region in 2005. The company delivered a total of 4,274 vehicles in the region in the first six months of 2012 - an increase of 15% over the same period in 2011. Audi executives in the region said they were confident they would top last year's record tally of 7,865 vehicles sold.

BMW Group Middle East also said it had achieved best-ever half-year sales results, as it delivered a total of 10,352 BMW and MINI vehicles to customers across 14 Middle East markets, marking a 13% increase over the same period a year ago.

The group said the UAE remained the highest volume selling market in the Middle East, accounting for 51% of BMW and MINI regional sales in the first half of this year, followed by Saudi Arabia and Kuwait.

In the ultra-luxury segment, Rolls-Royce Motor Cars said sales in the Middle East grew by 22% in H1, fuelled by 'exceptional growth' in Saudi Arabia. Not to be outdone, British luxury car maker Bentley said it sold 346 cars in the region in the first half of 2012, marking a 48% increase compared to the same period last year.

"The market has certainly bounced back from the big downturns that we had in 2008, and I think there seems to be a higher level of interest in the luxury sector," said Bill Carter, a research analyst at Autodata Middle East, an independent vehicle valuations service.

He believes one of the key factors driving luxury car sales in the region is increased investment by manufacturers in their dealerships. He noted that Audi is building its largest dealership in the world on Sheikh Zayed Road in Dubai, while BMW has recently opened a huge showroom in Abu Dhabi.

"For any brand to succeed they must invest in their dealerships, and these dealerships must improve their customer service to convince customers that they are serious about service. That is the only way they are going to improve their customer retention," he said. "And I think what is happening is that the general public is seeing this investment and taking it to mean that the used values and perceived residual values of these brands are strengthening because of the amount of investment that is going in."

Another factor that is hardening the value of luxury used cars in the region is the long wait times that customers are facing for some models, as many dealers are unable to keep up with demand. "You will always get some people who won't wait for a new car and instead are prepared to pay more for a good quality used car," Carter noted. "For example, we know there's a year's waiting list for a Porsche Cayenne, so what is happening now is that some people are paying over the price of a new one for a used one."

Looking ahead, Carter says the outlook for the remainder of 2012 is bright thanks in part to the fact that the timing of Ramadan coincides with the model year change for most manufacturers, which will provide a good opportunity for dealers to clear their existing 2012 model year stock. "So I expect there to be some good promotions during Ramadan and Eid and I see this year ending up considerably higher than last year," he said.