It is proving an extremely slippery time for car sales in the UAE ... and the weather’s got nothing to do with it. The automotive retail sector remains the worst hit as UAE — and GCC — consumers put the brakes on their spending.

If dealerships and manufacturers were hoping that the first quarter of 2017 might provide some relief, it has not exactly panned out that way. According to the consultancy Auto Data, vehicle sales in the Gulf markets are down an average 22.9 per cent in the year-to-date compared with the Q1-16 tally. Saudi Arabia’s seen a steep 27 per cent dent, Qatar’s is down 26 per cent and in the UAE, new car sales took a 21.5 per cent hit.

And all of this comes on top a dire performance all through 2016. “Dealerships had to cut new shipment orders by 35 to 50 per cent because the unsold inventory was piling up on the ground and adding to their costs,” said Ian Batey, recently confirmed General Manager of Autodata’s regional operations. “As against the usual 2.5- to 2.9 months of stocks, which was what they used to carry, they brought down to around 2 months.”

The problems were compounded because of the excess stocks that came through in Q1-16 and started piling up. “There was a major disconnect between manufacturer expectations and what dealerships wanted,” said Batey. “Manufacturers were only intent on shipping them and what they could earn wholesale. For them it was only about pumping out as much metal as possible.

“As consumers stayed away, Q1-16 turned out to be a disaster for dealerships in the Gulf, with Saudi Arabia, Kuwait, Qatar and Oman being the worst affected.”

The full year ended with volumes down 13 per cent over 2105, according to Autodata stats. “And 2015 didn’t break any records either in terms of sales,” said Batey, who was formerly with Ford and Volkswagen. (It was in 2014 that the UAE’s car market had its last good year, when volumes were estimated at more than 400,000 units.)

According to dealership sources, they are now resetting their expectations of when the next turnaround could happen. Some expect the second-half of this year to offer some sort of lift, while others say a more realistic chance awaits in 2018 when the Expo 2020 activity picks up more steam.

But local auto sources add that a good situation will be if the eventual 2017 tally comes in close to last year’s numbers. Anything better than that would be a significant bonus.

But for the present, the times are tough. Anecdotal feedback from dealerships talks about consumers unwilling to commit to new vehicle purchases. That is despite dealerships throwing in every form of incentive into getting them to buy. “Everything is being thrown in, so much so it does seem that it is no longer a house with a car that is being offered as promotion, but the other way round.”

Thankfully, a strong dollar for the better part of recent months has been of some respite for local dealerships, in keeping their import costs down. But insurance premiums on motor has gone up appreciably, and that’s another headache for consumers. Some dealers have responded by absorbing the first year’s insurance charges.

But these are only incremental steps. A marked turnaround will happen only when consumer sentiments get a lift from the many factors that have an impact — job security, a tighter grip on living costs, and cash to spare to engage in the occasional discretionary spends.

Until such time everything comes together, dealerships will have to continue with some nifty manoeuvring on how they handle stocks. Their re-export options have also been running dry for some time, making them even more reliant on domestic sales

source : gulfnews