Ahead of VAT, auto dealers brace for last hurrah
75%of passenger cars in the region by 2020 will be in Saudi, UAE and Kuwait
Although there is no denying the headwinds that hit the UAE's automobile sector in 2017, the year also witnessed the market changing tracks to welcome brands ranging from Tesla to super-luxurious cars such as the Vulcano priced over two million euros at the Dubai International Motor Show.
The automobile industry is now in the midst of adopting transparent business practices given the onset of value added tax (VAT) on January 1, 2018. Another prominent trend this year was sustainability and going green by reducing carbon emissions.
Prominent industry players are of the view that 2017 may end up seeing an unusual spurt in sales as customers try to buy ahead of the levy of five per cent VAT.
"It is normal for any industry to have ups and downs. While 20 per cent of the GCC auto market has suffered damage, 70 per cent is performing at a healthy mid-level. The remaining 10 per cent of the companies, including Arabian Automobiles Company, continued to perform strongly in 2017 despite competitive market conditions. We expect our performance to go from strength to strength and we will continue to enjoy healthy sales records," said Michel Ayat, CEO of Arabian Automobiles Company.
"We are confident that sales will pick up in the last two months of the year. Customers want to avoid the five per cent VAT, so they are evaluating their choices now and delaying their purchases until the end of year," added Ayat.
It is anticipated that by 2020, passenger cars in use in the GCC countries will expand at an annual average growth rate of 3.6 per cent to 5.4 per cent. Saudi Arabia, the UAE and Kuwait are collectively expected to account for more than 75 per cent of the region's passenger car fleet in 2020, according to Alpen Capital's research report. The key growth drivers are affluent buyers, rising tourism and infrastructure developments.
The UAE is also following the worldwide trend of shifting from salons to SUVs. A general trend is that customers are very well-informed before contacting a dealer. They visit less showrooms and have only two to three models in their shopping list. Also, customers are focusing more on quality and cost of ownership, said Axel Dreyer, general manager at Galadari Automobiles.
He added: "Despite the current difficult market conditions and downward trend in the automotive market, Galadari have embarked on a new journey of growth with the Mazda brand in the UAE. We have had tremendous growth in both volume and market share during the last year and we do not want to stop there. We have a great team and I'm confident we have set the right course to continue our journey of success. We have increased our market share by 0.4 per cent and increased overall volume against last year."
Towards the end of the year, demand for cars increases, considering discounts that dealers offer. Vineetha Nair, general manager, Dana Insurance Brokers, said: "We also feel that VAT savings could contribute to increased demand this year. We are making our suppliers/clients aware of VAT implementation and the responsibilities they have towards payment of tax on time."
Mohammed Khader, president of Al Majid Motors Co. - KIA, said: "We grew by five per cent year on year in 2017 thanks to models such the all-new Kia Optima, Cadenza and Rio in the passenger car segment, the all-new Sportage and Sorento in the SUV segment and the Kia Carnival, an eight-seater family van. Consumers are becoming smarter and more mature when it comes to innovative technologies that feature in latest models."
In recent years, the stigma on electric vehicles has given way to acceptance and even desirability. The region is now gearing up for this change. "We are excited about initiatives gaining pace across the region, whether in the UAE or Jordan, among others," explained Lennart Mueller-Teut, head of marketing and communication, Mercedes-Benz Cars Middle East.
"We see this as an opportunity to push the boundaries of electric performance - this was made clear by our line-up at the Dubai International Motor Show 2017. Two of our regional premieres were of models that fuse electric with performance - the Mercedes-AMG GT Concept and the Mercedes-AMG Project ONE. Autonomous driving is another topic that has created excitement in our industry."
Mercedes-Benz leads the way when it comes to autonomous driving. It claims to already have the technical capability to implement this technology today. It conducted the first automated drive on the E11 highway from Dubai to Abu Dhabi in an E-Class last year.
Globally, 1,717,300 Mercedes-Benz cars have been delivered to customers across the world from January 2017 until the end of September 2017, 11.7 per cent more than in the same period of last year. The third quarter of this year was the best ever in the company's history (573,026 units sold, an increase of 7.9 per cent), according to Mueller-Teut.
"2017 will go down as the year we pushed boundaries with our new line-up of launches and campaigns. We are confident that we will maintain our leadership position in the future," added Mueller-Teut.
The demand for best value-for-money deals will always be on top of the list for discerning customers who are not only looking for the best vehicle to purchase and invest in, but also to secure the best cost of ownership over the long run, said Thierry Sabbagh, managing director, Ford Middle East.
"2017 has been an exciting year for Ford and Lincoln in the Middle East. We have been busy re-energising our brands and working with our dealer partners to reinforce our networks and bringing the right products to our customers. Undoubtedly, our industry continued to face headwinds in the Middle East, but we saw the situation improve through Q3 and expect further improvement in the remainder of the year."
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