Combating coronavirus: UAE auto sales start to pick up
Positive signs of normalcy in the local auto market are evident after the reopening of commercial outlets.
Car sales in the UAE plummeted and screeched to a halt in April due to a lockdown and restrictions on the movement of residents due to coronavirus. However, there are positive signs of normalcy in the local auto market after the reopening of commercial outlets in the post-sterilisation programme, but the 2019 growth level is set to be achieved in late-2021.
In addition, pre-owned vehicles are also giving increased competition to new cars as residents become more price-sensitive due to ongoing the economic situation.
Dr Julia E. Saini, associate partner for mobility at Frost & Sullivan, said vehicle brands have seen a drop in sales of new and pre-owned cars between 50 to 80 per cent in March 2020 and zero sales in April owing to the lockdown.
"Overall, we expect 10 to 15 per cent of consumers will defer vehicle purchase by six to 12 months. Among the consumers who continue to pursue vehicle purchase, we expect the average spend to drop by 10 to 15 per cent due to the job loss as well as negative sentiment and uncertainty. Overall, we expect a drop in sales of 24 per cent in 2020," said Dr Saini.
Axel Dreyer, CEO of the automotive division at Galadari Brothers, the distributor of Mazda vehicles in the UAE, says there is an increase in demand over the last one week after the lockdown, which is very positive.
"Although the current economic impact is heavy, the people in the UAE have faith in government leadership to steer the UAE economy towards stable waters. Due to fear of infection, people are avoiding public transport and considering car sharing or cheaper used car option to serve their transportation requirements. This will also give a stimulus to the automotive industry. Many residents might also not travel this summer season so instead, they might look for a new or used car," he said.
Starting from late March, Dubai and other emirates remained under strict lockdown during most of April as part of the 24-hour sterilisation programme. UAE residents were allowed to step out only to buy essentials - such as food and medicines or visit hospitals. In addition, commercial outlets remained closed during the sterilisation period, which lasted most of the last month. As a result of decline in sales, dealers are trying to stimulate demand with offers on insurance, registration and maintenance contract, fuel, cash back offers and down payment support, which typically translated to Dh3,000 worth of savings.
Driving in 2021 While replying to a comment on recovery, Dreyer said: "That depends on the interpretation of recovery. If recovery means back to 2019 level, I'm not expecting that this will happen before the fourth quarter of 2021. But there are so many variables that are uncertain for the moment. It is difficult to provide a prediction but for sure the coming 12 months will be tough for the automotive market."
Suliman Alzaben, General Manager, Hyundai UAE, said the total overall drop by the end of March was 9 per cent, a value that is expected to increase in Q2.
"However, based on UAE governmental initiatives, we are expecting the market to start recovering starting Q3 with slow yet steady growth," he said, adding that recovery in sales and prices will vary from one industry to another.
"Overall, 2020 will be a challenging year, and we will encounter heavy financial burdens to overcome these challenges," added Alzaben.
Dr Saini expects the market will have a relatively short-term impact on new vehicles sales and moderate growth is expected already in 2021. "We expect to a see a growth of 4 per cent in 2021." She expects that the used car market to be less impacted by the Covid-19 slowdown than new car sales in 2020 as customers will remain price-sensitive. "We expect the used car sales to drop by 14 per cent in 2020. Around eight out of 10 consumers who are considering a car purchase are eyeing used cars. Accelerating growth in online platforms and increased transparency of used car dealers' offers [valuation and vehicle history] are driving customers' shift to organised used car market in the UAE," she added.
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