Expo 2020 Dubai to be a driver for auto sector
The GCC automobile sector has always been one of the most dynamic and faster-growing sectors in the region.
Dubai - Passenger cars on GCC roads expected to grow at 5% CAGR to 13.2M in 2020
The UAE's auto sector is very keenly waiting to see 2019 unfold as the nation gears up for Expo 2020 Dubai and businesses get ready to absorb the supply of vehicles as visitors are expected to surge and new projects take off, boosting business confidence among consumers and corporates.
This year did witness a transition phase for the sector and industry experts opine that while car sales remain a bit subdued, hopes of business rebound supersedes the slowdown. The GCC automobile sector has always been one of the most dynamic and faster-growing sectors in the region. Despite a recent slowdown in demand for automobiles in the backdrop of sluggish economic conditions, factors such as an expanding and well-heeled consumer base, high urbanisation rate, significant infrastructure developments, a bustling tourism industry, aggressive promotional activities, attractive financing options, technological development and others will play a significant role in driving the growth of the sector in the long term, points out Alpen Capital.
Furthermore, it sates that in addition to coping up with the economic slowdown in parts of the region, the sector is facing challenges like a shortage of a skilled workforce, grey imports, high competition and currency fluctuations. In the wake of these challenges, we anticipate vehicle sales to pick up towards 2019 and 2020 thereafter, especially in the UAE as we approach events like Expo 2020.
Overall, the industry is in the transition phase and continues to offer opportunities in the areas of automotive manufacturing, aftermarket, and new technology development. Also, with limited vehicle manufacturing activity in the GCC, member countries continue to rely heavily on imports to meet the demand of vehicles. The UAE, in particular, is the most vibrant automobile trade markets in the region, within which Dubai acts as a major hub for trade, the report says.
The number of passenger cars in use in the GCC is expected to grow at a compound annual growth rate (CAGR) of 5 per cent to 13.2 million in 2020. New passenger car sales are projected at 1.4 million in 2020. By 2020, passenger cars in use in GCC countries are anticipated to expand at annual average growth rates of 3.6 per cent to 5.4 per cent.
Saudi Arabia, the UAE and Kuwait, collectively, are expected to continue holding more than 75 per cent of the region's passenger car fleet in 2020. New car sales in Saudi Arabia are likely to reach nearly 743,000 in 2020, suggesting a CAGR of 2 per cent from 2015. At the same time, new car sales in the UAE are projected to grow at an annualised rate of 4.5 per cent to over 267,000 in 2020.
The UAE has been extremely tech-savvy and this is evident as the sector adopts the latest solutions to boost consumer experience; more and more car dealers are depending on big data and advanced analytics to cater to both car manufacturers and consumers and this helps to work on a business strategy that not only helps with industry insights but also assesses estimated imports and stocks.
Customer satisfaction remains on top of the agenda among UAE auto dealers who are training their staff to gain more insights on consumer preferences. Consumers are keen to see more on after-sales services and the UAE is very keen on offering consumers the best.
A key trend that dominates the UAE auto sector is a limited number of vehicle manufacturers in the GCC. However, the situation is possibly going to change in the future, as Saudi Arabia, the UAE and Oman are receiving investments to set up automotive production units.
Vehicle customisation takes top priority as the UAE is witnessing a growing trend of car accessory outlets across the country. While Japanese car brands remain popular in the GCC and the high-end market continues to be dominated by European makes, Chinese brands are fast closing the gap.
The automotive aftermarket in the region is thriving as an increasing number of vehicles, coupled with hot climatic conditions and a rugged terrain that affects the lifespan of tires and batteries, has created a major business opportunity.
The rising number of tech-savvy people and the use of social media have encouraged automobile dealers to establish an online presence. Besides, the Internet, combined with new technologies, is reforming the sector, with the advent of connected vehicles.
Similarly, mobile application-based taxi-hailing service providers are gaining presence in the GCC. Uber, which entered the GCC market in 2013 by launching its services in Dubai, has now grown its presence in other major cities in the region. Although vehicle sales in the GCC remained subdued during 2016 and remained under pressure in 2017, the automobile sector is poised for growth in the coming years to 2020 as the region adds nearly four million potential buyers, reinstates economic growth and offers immense opportunities in the areas of automotive manufacturing, aftermarket and new technology development.
The writer is co-founder of Dana Insurance. Views expressed are his own and do not reflect the newspaper's policy.