Lebanon’s automobile market seemingly defies economic analysis, as it’s currently experiencing growth while others are in decline. In the Gulf, automobiles sales in the first quarter have plunged by some 23 percent and in the United Arab Emirates alone by 45 percent, while Lebanon saw 19 percent growth in sales. Last year, when the financial crisis came to a head, the Lebanese car sector had its best results in years, increasing from around 20,000 units sold in 2007 to more than 35,000 units in 2008. As Fayez Rasamny, vice chairman of Rymco, the dealer for Nissan, Infiniti and GMC put it, 2008 was a “perfect year.”
“The sector was growing very fast last year, no one had stocks so [we] ordered more and en route shipments were even pre-sold. There was no holding cost of inventories,” he said.
For Rymco, the market leader, 2008 certainly was an excellent year, with sales increasing nearly 50 percent, up from 4,200 cars sold in 2007, to nearly 8,000. While the upswing in mid-range cars could be expected, the luxury end also did well. For Mercedes dealership T. Gargour and Fils, last year was “the best year ever for five years,” said Marketing Coordinator Krystel Hajj. Sales of used cars have equally spiked, up by an estimated 50 percent over the past year, according to Cesar Aoun, the Chrysler Car Group Manager.
So what explains this surge in sales?
“To be honest, no one knows, and because we don’t know, we are having problems now,” said Rasamny. Indeed, developing a marketing plan in a volatile market like Lebanon’s has always been tricky, but when sales unexpectedly spike, this presents further issues — how many cars do you import, what kind of marketing will work and ultimately, why the up-tick?
Rasamny said their first assumption was that consumers were switching from used to new vehicles, but used cars sales also spiked. Then the Rymco team, just like other dealerships, considered the surge was due to an increase in purchasing power, but that had also remained unchanged. The dealers came to a consensus that the responsibility for the increased sales can be traced to two factors that have been the bane and savior of the Lebanese economy: politicians and the banking sector.
Following the dismantling of the opposition’s “tent city” in downtown Beirut, the Doha agreement and the appointment of a president in May, 2008, stability meant an upswing in sales.
“The president’s appointment meant sales went up like crazy, showing Lebanese had the money but were waiting on the political situation to improve,” said Hajj.
But the first quarter of 2008 was very different from the rest of the year as well as the first quarter of 2009.
“In Lebanon, you never compare year-on-year, [because] if there was a bomb in January, you cannot compare to last January,” said Rasamny.
The banks also played their part by offering car loans, with lower non-acceptance rates of clients and more access to funds than in previous years.
“A main reason for growth was that banks were very aggressive in loans, so this was good for prospective buyers rather than just replacements,” he added.
But while last year dealerships couldn’t wait for orders to be delivered, this year retailers have stocked more inventory, forecasting this year to be even better. However, comparing the first quarter to the last quarter 2008, Rasamny said “we’ve seen a slowdown in retail sales this year.”
The sector’s health now hinges on the outcome of the elections and continued stability.
“If nothing happens during the elections it will be a great year. I personally forecast similar sales to last year, less but similar, with profitability nowhere near 2008,” said Rasamny.