Dubai: There could be enough fuel left in the tank for the UAE’s automotive retail sector to pull out another double-digit growth in 2015. This sentiment, shared by many in the industry now, is quite a contrary to earlier forecasts that growth levels would tail off appreciably after four sustained years when car retail sales pulled off one record after the other.
This year could see overall volumes at or around the 350,000 units mark, with some major fleet sales expected to be finalised in the coming days.
But it is on sales to individuals that dealerships are keeping close tabs on, and there is still plenty happening there to feed any latent demand. “More and more people are spending longer periods employed in the UAE and it is now common for many to make the UAE their permanent home ... even if only for the duration of their careers,” said Arno Husselmann, General Manager at Abu Dhabi Motors, the dealership for BMW and Rolls-Royce. “The additional growth (in the economy) is attracting many more Individuals — and families — who are finding work here and with that increases the spending power of the population.”
Banks, and the dealerships too, are willing to offer whatever it takes to ensure people keep buying the cars they want. For instance, Gargash Enterprises, the Mercedes-Benz dealer for Dubai and the northern emirates, now has schemes where they finance half of the 20 per cent down payment that required in any vehicle purchase in the UAE. “By doing so, we are providing an incentive for a buyer to consider a higher value purchase than would have been the case if the financing scheme was not available,” said Karl Johan Sandesjo, General Manager at Gargash. “There is still plenty of demand in the market ... all that dealerships need to do is have enough happening to keep buyers coming to the showroom.”
It could also be that this is the final stretch for the prevailing low auto financing rates, of around 4-4.5 per cent for new cars and depending on the lending institution. If the US Federal Reserve finally decides to hike base rates at some point in early 2015, this will set off a chain reaction of higher loan payouts for borrowers in the UAE.
“In recent weeks, all dealers have been making a final push to get through to those potential buyers who are yet to make up their minds when to buy,” said a senior official at a dealership. “As important as the models being advertised, dealers — and lenders — are also emphasising the low interest rates and flexible payment plans. It could be quite a jolt for local consumers when they realise their monthly outgo on payment plans will have increased, even if marginally. The great low (interest) rate party is coming to an end after four years.”
If by end December, buyers are yet to make up their minds, dealerships will have another go in January and early February with offers tied to the Dubai Shopping Festival.
Even here, there are subtle variations in sentiments. Local prestige car dealerships have their antennae tuned to wider macroeconomic/market fluctuations than the local interest rate changes as such. “Our main concerns would be any massive fluctuations in the euro, a sharp decline in the stock markets or the oil price,” said Husselmann. “Most of our customers are investors and substantial changes in either, if negative, could cause people to delay their purchase intentions. Many still pay cash for their cars — therefore a sharp rise in interest rates will have a limited effect on purchase decisions regarding any of our products.”
