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Strong Demand Of Automobile Sector In UAE

For the last few years following the global recession, car sales in UAE have enjoyed a steady recovery, with automobile dealers reporting double-digit sales growth. Let alone, the automotive sector in UAE posted 400% growth in the last ten years growing from US$ 1.1 billion in 2004 to US$ 4.7 billion in 2013.

Likewise, sales of new vehicles rose by near around 12% in the first three quarters of 2014, reflecting renewed economic confidence, with forecasted annual growth of nearly 20% in the sector over the 2014-2017 period.

Impressive figures from BMW, Audi, Volkswagen and Rolls Royce indicate that the region’s economy is purring along nicely. As an example, UAE alone accounted for 54% of BMW’s sales in the Middle East, followed by Saudi Arabia and Kuwait. A glimpse of such figures, is a strong indicator of the country’s economic health.

According to a new survey, car sales in UAE are likely to get a major boost in the next two years, when nearly eight out of every tenth person will buy a new or a pre-owned vehicle. The finding of the survey reveals that up to 75% of consumers intend to buy a car in the next couple of years which is positive news for automobile traders in the country.

The strong demand in automobile sales in the country can be attributed to the increase in consumer confidence levels and growing expatriate population which is further complimented with stable economy, positive business environment and competitive interest rates.

According to International Monetary Fund (IMF) report, the remarkable growth in the automobile sector is largely driven by the country’s high national wealth; growing per-capita income at $63,181 in 2013, UAE is ranked as the 7th country among 187 countries. Also, the significant government investment on building social and economic infrastructure and buoyant private sector has a substantial effect on the country’s automobile sector.

Even though the current public transport system is evolving at a rapid pace in UAE, personal transportation is still considered a must. Moreover, it is not just the new cars that are selling well, but consumers in UAE are spending around AED 30,000 to AED 60,000 on second-hand vehicles as well. In luxury segment, Rolls-Royce, Bentley and Range Rover were the most sought after cars which indicates high purchasing power parity among the UAE residents which.

UAE automobile market is recording a 27% growth in 2013; due to the strong performance of the country’s economy in the past three years following the financial crisis with expectations to record sales of 380,000 vehicles in 2013 compared to 305,000 vehicles in 2012 and 243,000 in 2011.

Findings suggest that UAE automobile market will continue on account of favorable macroeconomic conditions, household spending in UAE along with increased access to vehicle financing and the migration of residents from neighboring countries.

In the long term, the new vehicles segment will also receive some support from the growing regulations in the used cars segment, which are gaining popularity among budget-conscious consumers of UAE which signals sufficient growth for carmakers to tap in the new vehicles segment, saying that Japanese manufacturers dominate the UAE automobile market with a significant market share.

Dubai’s successful bid to host World Expo 2020 will give further boost to the automobile industry in Dubai and UAE; the present surge in the economy and growing number of expatriates and tourists will influence the demand for personal transport and trigger the growth parameters for the automobile industry. This will also have an impact on logistics sector with car rental companies willing to add vehicles to their fleet in order to accommodate local, regional and international demand.

It can be concluded that there lies an impressive, dynamic and long-term growth opportunities to tap upon for investors and companies looking to capitalize on one of the most emerging and growing sector of UAE economy.

Автор: RKonnect
The author is the Managing Director of Research Konnection, a Dubai based market research and consulting firm that helps local and international companies to identify emerging business opportunities and successfully expand in the Gulf region. The author can be reached at waqas@researchkonnection.com
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