PRLog (Press Release) – Apr 14, 2011 – The Dubai Chamber of Commerce and Industry (DCCI) has reported that sales in the UAE have rebounded after taking a significant dive in 2009. Car sales in the Gulf country had fallen by between 25% and 30% after the global financial crisis hit the country, leading to a collapse in the local property market, which had been driving much of the local economy. The DCCI has said that the local car market could be the first sector to return to pre-crisis sales levels, as the rebound in purchases has been unexpectedly strong, particularly in the latter parts of 2010.
The organisation has predicted that sales will grow an average of 8% annually until 2014. Re-exports, particularly to Pakistan, are also expected to grow by 5% annually too. The rise is car sales is expected to accompany a broadening of car ownership in the UAE. It is expected that 57% of the households in the country will own a car by 2014, with the vast bulk of this growth occurring among poorer members of society. This trend will help mass market automakers increase their sales in the UAE goverment technology .
This growth in ownership is being driven by easier access to auto financing. Increasingly competitive offers are available to car buyers, as the housing market's stagnation forces UAE banks to focus their credit on other areas. New regulations from the UAE central bank risk this availability, however. The central bank recently banned consumer loans that are worth more than twenty months wages for a customer or that have monthly repayments of more than half their salary. These regulations are likely to make the market more stable - and to ensure greater security for the broader financial system. But if these regulations have any positive effect on the financial sector they will inevitably make it more difficult for the very poorest to purchase vehicles in the UAE. This will, obviously, have little effect on the luxury or mid-market, but the budget vehicles available will run up against this barrier for expanding sales.
The price of car insurance in the UAE has hit record lows. Currently, insurance policies charge a yearly premium which is worth between 3.5% and 4% of the value of the insured car - typically insurance companies try to keep this ratio at 4.5% or 5%. These low premiums are due largely to the collapse in car sales which occurred in 2009. Much of the growth and profit for the firms had come from new car sales. Many chose to maintain market share at the expense of profitability as new customers dried up, leading them to slash premiums to attract customers. This is unlikely to reverse in the near future, making the prospect of purchasing a car now a more attractive prospect for many consumers on the margins who may otherwise have decided against a purchase due to high insurance costs.
In the near term, BMI expects the Emirati car markets to continue their growth in 2011 after 2010's rebound. Sales in 2009 had dropped to an estimated 325,274 units, from a 2008 peak of 355,117. BMI expects that 2011 total sales will reach 352,913 units.
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