With the Eid festivities all set to kick off in earnest, it also marks a crunch week for the UAE’s automobile sector which is hoping to regain some of the traction in new car sales after a subdued performance in recent weeks.
Dealerships, regardless of their scale, are pinning expectations on buyers heading back to the showrooms to check out the new models and — ideally — buy them. “It has always been the case that the months before Ramadan represent a quiet period of sorts for new car sales and it has not been any different this year,” said Michel Ayat, CEO of Arabian Automobiles Co. “Since July we saw some sort of a drop in retail sales, though those to fleets remained good. Individual buyers are engaging in tactical waiting. ” Industry sources are broadly in line with Ayat’s sentiments about the performance of their own brands in the recent past. Even then, this year’s many Eid specific campaigns from the automotive sector will carry a rare urgency, with even a minor improvement in retail sentiments seen as a welcome break.
It has been nearly four months since the Central Bank put in place guidelines that did away with 100 percent auto financing in one stroke. It was replaced by a ceiling of 80 percent. Suffice to say things have never been the same for the automobile market. “It’s been the toughest four months for new car sales and even worse than what was experienced in 2009,” said the head of a dealership representing a leading European brand. “If the decline two years ago was about buyers lacking in confidence to acquire new assets, now it’s about coming to terms with a whole new way of going about buying a car. So used were they to buying without any down payment; for them to shell out 20 percent is seismic. “As with any change, it will take time for it to percolate into the buyer psyche. It’s been four months already and we are hoping that it will not be much longer.”
There has been talk of the Central Bank taking a re-look at their recent directives based on feedback from market participants. But nothing concrete has emerged out of this as yet. This is why all of the attention is being vested in the “tactical” campaigns that will be running during Eid.
The 2012 model year vehicles have started to make it to the showrooms and getting vantage positioning. What remains to be seen is how many buyers are going to turn up. If by the end of the campaign, the numbers hold up well for the dealers, that would be just cause for celebrations. Until then, they would be marking time and hoping.
Used vehicles in demand
Does a drop in new car sales work out to increased demand for pre-owned vehicles? By the looks of it, the jury is still out on whether there is any such connection. Since May 1, the general sentiment within local automotive circles is that retail sales have been driving through a testing phase. Multiple factors have brought this on, but topping any such listing has to be the intervention of the Central Bank with tougher regulations on auto financing by banks.
So has this led to a situation where more buyers are inclined to consider going for pre-owned cars so as to reduce their financial obligations? “I don’t think we can make a general statement,” said Ahmad Al Attar, manager for the advantage certified cars programme at Al Yousuf LLC. “Yes, the preference for used cars has gone up among customers, but it is not possible to attribute any single factor towards this interest.” Also, the Central Bank directives apply as much to buying a pre-owned car as it does to a brand new one. The 20 percent upfront payment has to be there irrespective of the lineage of the vehicle.