The United Arab Emirates’ luxury sports-car segment represents 11 percent of the country’s car market, equivalent to some 3,000 units per year, according to Business Monitor International (BMI). Ford estimates it higher, at between 18 to 20 percent.
Whatever the actual figure may be, luxury car sales have certainly defied market logic by not flat-lining in the midst of an economic downturn, but rather holding steady and even growing.
Sales to Emirati citizens and expatriates working in the UAE have also remained consistent, allowing brands to retain sales to established customers and the high-roller expats that managed to ride out the crisis. Porsche registered 11 percent growth in the GCC market from July 2009 to July 2010, recording similar growth in the UAE, with Abu Dhabi and Dubai selling the largest volumes in the Gulf.
“Porsche is in the top three for luxury sales, along with BMW, Mercedes and the more exotic sports-car manufacturers,” said Deesch Papke, managing director of Porsche Middle East and Africa. “Everyone is here: Ferrari, Bentley, McLaren, Lamborghini… and it has been an extremely good environment for premium brands. We are not in isolation, all have had equal success.”
BMW’s UAE sales confirm this, up 29 percent in 2010. “People are still in the market to buy luxury vehicles, which is evident in our positive sales growth this year,” said BMW’s Middle East Managing Director Phil Horton. “From January to November, we sold 6,616 BMW and Mini vehicles in the UAE, which remains our biggest selling market. Some months have been more challenging than others, but overall both our UAE importers have reported strong growth in 2009. As for 2010, the sales of our biggest selling importer, Abu Dhabi Motors, are up 41 percent and AGMC in Dubai, Sharjah and the Northern Emirates have increased their sales by 18 percent.”
Audi has also had a great year, with UAE sales up 18.5 percent in 2010 and equally strong growth throughout the GCC, with sales in Saudi Arabia up 17 percent, 5 percent in Kuwait and 30 percent in Bahrain.
“The mass market is growing faster than the premium, but premium has always had sustainable growth here,” said Jeff Mannering, managing director of Audi Middle East. “There will be a lot of investment in the GCC and the UAE over the next 18 to 24 months to make sure the product is presented in a superbly premium way, and we will spend hundreds of thousands of dollars on training and services. That is how you become number one, not just by selling cars.”
GM estimates that the luxury vehicle market in the Middle East grew 6 percent as of September 2010 on the previous year, and reported 19 percent growth for its luxury brand, Cadillac. Despite this growth, the car sector has still struggled to get overall sales back to pre-crisis highs.
An automotive hub?
News came in June that the Abu Dhabi government had made a “strategic decision” to create an automotive industry in the emirate. The plan is that phase five of the Industrial City of Abu Dhabi in Musaffah will have 11 square kilometers of land allocated for the automotive sector, from assembling vehicles to services and sales. Abu Dhabi has gone car crazy in recent years, with the opening of Ferrari World and a Formula 1 track, which followed Abu Dhabi investors acquiring stakes in Germany’s Daimler and Italy’s Ferrari.
But manufacturers in the UAE market said the idea was overly ambitious, citing several drawbacks, such as local demand to achieve economies of scale and the cost of importing raw materials, set against the already low barriers to entry, with import duty on vehicles just 5 percent.
“It is a very ambitious plan and I think it is highly unlikely,” said Porsche’s Papke. “If you look at car manufacturers, they have plants where the market is.”
The outlook
If BMI’s forecasts for 2010 are achieved — 8.5 percent growth with nearly 353,000 units sold — then the sector will have almost returned to the boon year of 2008, when 355,000 new vehicles were driven off the lot. Attaining such a figure suggests that in 2011, the sector will achieve actual growth; consumer confidence is returning and the International Monetary Fund predicts 3.2 percent economic growth in 2011, up from 2.4 percent in 2010.
Manufacturers are optimistic that the UAE market will be back to sustained growth, albeit not the double-digit runaway expansion of the pre-crisis boom years. Papke thinks the more subdued UAE will be better for business in the long run and that more normal growth in the single digits signals a maturing of the overall market.
