Dubai: Car dealerships in the UAE sold just over 100,000 units in the first five months of 2019 — a gain of just 1 per cent from last year. But even that ultra-thin increase counts for a lot more in the larger scheme of things for an industry that has been hit with dropping sales since 2015.
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“Yes, it’s the first sign of growth in four years … and that’s just great,” said Michel Ayat, CEO of AWR Automotive, which runs the Nissan and Renault dealerships in Dubai and Northern Emirates. “I believe the auto retail sales in the UAE are finally ready for a turnaround, not by much but still enough.
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“For the full-year 2019, we expect overall vehicle sales to be in the 240,000 unit plus range, more or less similar to 2018. But in 2020, that could grow to around 250,000-260,000 units, which would make for a 3-5 per cent growth.”
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That is something global carmakers and their local partners can live with. It would mean an end to the double-digit decline in year-on-year new car sales since 2015, which led the numbers to fall from around 420,000 in 2015 to just over 245,000 plus last year.
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In other words, more manageable growth rates are what the industry wants to see going forward.
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Normal growth rates are ‘good’
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“Growth rates were abnormally high in the 10 years leading to 2015, except for 2009-10,” said Altar Yilmaz, general manager for regional operations at the South Korean luxury car brand Genesis. “Even in 2010, people were saying that it would take 10 years for car sales to rebound from the financial crisis.
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“But in less than 10 months, auto sales were nearly back to normal levels. Sure, stocks were still high for a further eight to nine months, but organic demand was back to normal. And then it started to grow in double-digits for another five years.
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“Now, we are moving to phase of normalised growth — I would hope the resilience of these markets will show up once again. If the market normalises at a better than 3 per cent growth a year, that’s good. Also, disposable incomes have dropped and people want to hold on to their vehicles for far longer.”
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What’s driving growth this year
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Even a casual glance at the highways and secondary roads in the UAE will show evidence of why new car sales are inching up. Each new limousine being added to the Uber and Careem fleets represents a win. In addition, there is the growing presence of cars flying the ekar and udrive banners. These ride sharing portals allow users to pick up a car and then essentially pay by the minute.
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So far this year, cars sold to fleets or those operating under Uber/Careem or ekar/udrive make up between 60-65 per cent of overall volumes. In other years, the split between fleet sales and those sold to individuals was roughly 50:50.
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“Customer behaviours are changing on owning cars — it’s a reality we have to accept,” said Ayat. “The UAE auto market will not remain untouched by more people wanting to use ride-hailing or ride-sharing services.
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“Whether we sell to an individual or fleet, if new car sales can put in that 3-5 per cent annual growth, then the sector can absorb shifts in consumer preferences. Even if it means continuous pressure on industry profit margins.”
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Government-led projects hold the key
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That various sectors, including automotive and transportation, will start seeing benefits from Expo 2020 has been said before. But these sentiments will be ratcheted up the closer it gets to the actual opening on October 20, 2020 and the subsequent months of fever-pitch activity leading up to the closing on April 10, 2021.
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“As we go through the rest of the year, I’m quite positive of how the auto industry will shape up,” said Thierry Sabbagh, Managing Director at Nissan M.E. “The market is stabilising for sure; there are great signs of a recovery over the last three or four months in Saudi Arabia, for instance. More government spending is happening here for the upcoming Expo 2020 and everything that’s going on around it. These will create a stabilising of trends for the auto sector.”
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Genesis steers through tough times
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It was never going to be a smooth run for Genesis when it launched the premium brand in the UAE back in 2016. New car sales were tanking by then, and even in the luxury category, demand was drying up.
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Three years down the line, the South Korean manufacturer is still taking on the odds and turning them in its favour. “The market’s challenging, but difficult? No,” said Altar Yilmaz, who heads the regional operations. “I honestly didn’t have volume expectations — the first aim was to make our brand recognisable as a luxury brand. And we are there among top brands that come to mind of potential customers.”
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Next up, Genesis will be introducing its first SUV option — some time mid next year — to add to the three sedans already in the showrooms, which it now shares with parent brand Hyundai.
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There is also a plan to have its own branded showrooms, as and when the market would allow local and regional dealers to commit to these investments. “The intention is there — we’re working on a five year network expansion plan through to 2023,” he added.
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Nissan Middle East not distracted by Ghosn saga
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It was in November last that global auto industry was left shaken and stirred by the arrest of Carlos Ghosn, the supreme power at the Nissan-Renault combine. Much has happened since then, and for Nissan’s Middle East operations, it’s about moving on.
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“Nissan ME is stronger than ever — any changes related to personnel or senior management changes is an ongoing process,” said Thierry Sabbagh, who heads up the regional office. “They are not linked to any thing that happened at the global level. The changes happen every year. At the end of the day, we are only really focused on delivering our midterm plans.”
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Castrol comes up with instant deliveries
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Mechanics at local car workshops needn’t wait around for the goods to arrive. At the very least, they can get their hands on engine oil at the earliest.
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Castrol in association with its partner, Central Trading Company, has launched a fleet of dedicated delivery vehicles to support these workshops. These will ensure “essential supplies of Castrol brands are always readily available without delay”, according to a statement.
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“Changing your vehicle’s oil at regular intervals isn’t just a good idea — it’s a vital part of keeping it running properly,” said Mohammad Aqel, General Manager of Central Trading Company, part of Al Rostamani Group and distributor of Castrol automotive lubricants in the UAE. “Quality engine oil keeps the internal parts of the engine lubricated and cool, stopping the moving parts from grinding against each other causing wear and damage.”
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