Auto sales in the UAE are expected to rise 5 per cent between 2009 and 2010 as an easing in liquidity conditions boosts confidence in the sector, according to an analysis by the Dubai Chamber.
A general high-level of disposable income and renewed consumer confidence in the UAE on the back of easing liquidity conditions, provides a favourable background for the auto sector in the coming months. Furthermore, plans for a car production plant in the UAE could help initiate a local automotive manufacturing industry.
Since the UAE is the fastest growing auto market in the Middle East, the sector is in a position to expand with preliminary plans for a car production plant to help spawn a local auto manufacturing industry already in place.
“The automotive sector was affected by the financial crisis as banks became more cautious in granting auto loans. But with the UAE accelerating on the path to economic recovery, banks are now being more flexible with auto financing which will no doubt benefit the sector, fuel the demand, and ultimately increase sales,” Dubai Chamber Director-General Eng Hamad Buamim said.
The analysis disclosed that it is increasingly apparent that the UAE automotive market is mature, with vehicle ownership rates of over 540 per 1,000 inhabitants — a rate that exceeds most of the developing world.
Car dealers in the UAE are optimistic on the outlook for the second half of 2009 and are confident that their sales will grow though at a lower rate, in what seems like a challenging year on the back of the global financial crisis. This is primarily down to an easing in lending conditions with banks loosening their belts and imposing lower rates and more lenient requirements on borrowers. Over 70 per cent of new car purchases are made on credit in the UAE. Galadari Automobile’s General Manager R. Krishnan expressed a cautious optimism about the rest of 2009. “We are hopeful that the market will recover during Ramadan and thereafter, and with the introduction of 2010 models by then, certainly Mazda is looking forward to a brighter second half.”
The combination of relatively high living standards, a growing population in the UAE, as well as a resurgence in oil prices, have been the key driving forces behind the growth in the auto sector in the UAE. Despite an expected slowdown in auto sales this year, the outlook based on resurgence in consumer demand on the back of a pick-up in the global economy is likely to lead to robust growth in 2010 and beyond.
Whilst the UAE does not possess a sizable domestic automobile manufacturing capability, its high national wealth has created a niche market for sales of imported vehicles in recent years, and there is a large re-export trade based on the country’s regional status as a key strategic location, Dubai Chamber said. Car ownership is expected to rise above 55 per cent this year for the first time in the country’s history. The analysis further revealed that though Abu Dhabi contributes over 55 per cent to overall UAE GDP, its economy is dominated by the energy sector. Thus, it is diversified Dubai that is experiencing the most rapid growth, and it has taken a lead in the auto sector, accounting for nearly 50 per cent of the total vehicle stock.
