Smiles from the starting line

Regional car sales make tracks in 2011

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Car distributors in the Gulf and Middle East region have seensales bloom in the first quarter of 2011. Whether they are unrestrainedly regalchariots or utterly practical wheels, vehicles made by automotive brandmanufacturers of the Far East, Europe and the United States have enjoyedbroadly improved demand in the Arabian Peninsula and the Levant, as comparedwith the first quarter of 2010.

Rolls Royce, the British luxury brand and proper matrimonialmotorcar maker, reported that regional sales were up 90 percent this springwhen compared with the same quarter in 2010. According to a statement by theRolls Royce dealer for Dubai and the Northern Emirates, AGMC, Dubai was at thefore of Rolls Royce’s regional sales increase with 178 percent first quarter growth.This put Rolls Royce at the top of regional percentage growth among carmanufacturers who provided Executive with first-quarter performance figures forthe Middle East.

A spokesperson for Rolls Royce Middle East told Executivethat the car maker had not only a record first quarter in the Middle East, butalso expects in 2011 to globally outsell the 2,711 motorcars it shipped in2010. That would include another record year in Middle East sales.

Kia, Korea’s easiest-to-pronounce auto brand, said it recordedyear-on-year growth of 19 percent to nearly 45,000 sold vehicles for the MiddleEast region in the first quarter of 2011, including a single-month gain of 29percent March-on-March. In first-quarter statistics for the Gulf CooperationCouncil, the make advanced 6.3 percent year-on-year to 14,444 units.

Kia’s increases notably came from a base of already highunit sales a year ago, as the manufacturer claimed three consecutive years ofgrowth in the Middle East from 2008 to 2010.

Last year, Kia sold 175,369 units in the Middle East for ayear-on-year increase of 48 percent, according to figures provided by thefirm’s head office in Seoul.

United States-based General Motors and Ford also sawimproved demand in the GCC last quarter. In GM’s stable of brands — comprisedof Cadillac, Chevrolet and GMC — just shy of 30,000 vehicles rolled out of theregion’s showrooms, representing 16 percent better unit sales than the yearbefore. 

Without releasing actual sales numbers, Ford Motor Companysaid it achieved a 52 percent increase in GCC sales compared to the same periodlast year. According to Ford Middle East, Saudi Arabia recorded the highestregional growth for the brand, at 75 percent, followed by Kuwait with a 50percent increase. The United Arab Emirates, meanwhile, saw an increase of 32percent.

National trends

‘Full blossom’ was also the assessment for the Germanbrands, which regionally enjoy a strong position among European imports andhave the reputation of doing particularly well in the premium segment. BMW, theBavarian auto smithy whose motto hails driving as enjoyment, sold more than4,600 new BMW and Mini cars in 14 Gulf and Levant markets in the first quarterof 2011, for a 19 percent year-on-year increase, though more than 4,200 ofthese cars were BMWs. Abu Dhabi and Dubai registered year-on-year increases of42 and 38 percent, respectively. 

BMW Middle East confirmed to Executive that the firstquarter of 2011 was the group’s best ever in the region in terms of sales forboth BMW and Mini brand vehicles. This marks a further increase from a 2010performance where group sales of 17,119 vehicles across the region had been thehighest in BMW history. According to BMW, its 2010 sales in the Middle Eastexceeded regional sales of any other European premium manufacturer.

Audi, the German car maker in perennial praise ofengineering, whose hometown is just a 38-minute train ride from BMW’s Munichbase, proved a close competitor in percentage gains, reporting 19 percentgrowth in first quarter unit sales in the Middle East. In the UAE, Audiadvanced 23 percent in the first quarter. The manufacturer’s spokesperson saidgrowth was driven by the marque’s flagship sedan and by its sports utilityvehicles.

The communications head office of Stuttgart-based Mercedestold Executive that first-quarter sales growth in “Arabian markets, includingDubai, Kuwait and Saudi Arabia” amounted to 5.6 percent for total first quartersales of 4,000 Mercedes-Benz vehicles.

UAE distributors of Japanese auto brands, whose marketshares in the Middle East are proportionally higher than Japanese car makers’global market share, continue to appear the least eager to disclose unit saleswhen compared with their Korean, European and American competition. But NissanMiddle East, marking a trend toward transparency, did provide Executive withexact numbers for the first quarter and the company’s fiscal year 2010, whichended March 31. Jebel Ali-based Nissan Middle East Free Zone (NMEF) said thetotal first quarter 2011 sales of Nissan and Infinity vehicles amounted to45,137 units. For the 2010 financial year, the regional total was 166,448units. While both NMEF figures represent drops on a year ago, full-year numberswere down less than one half of 1 percent. First-quarter sales, however, weredown more than 14 percent from 52,938 units in first quarter 2010.

The contraction in unit sales for Nissan vehicles in theMiddle East runs counter to the overall growth trend in sales of cars made bybig name manufacturers. The news is not all bad for NMEF, however, whichinformed Executive that the group’s up-market Infinity brand realized 28.6percent growth in sales during the first quarter of 2011 when compared to thesame period in 2010. 

According to estimates by General Motors, total motorvehicle sales of 1.148 million across the Middle East in 2010 were up 8 percentfrom 2009. Of these, 48 percent were Japanese, 14 percent Korean, 15 percentAmerican and 23 percent European makes, with emerging markets’ automotivebrands — from India, Iran and China — “not on the radar” of local buyers.

Yet, given the lack of confirmed governmental data on exactvehicle numbers for the GCC and for individual member states, all industryfigures include a larger portion of assumptions and estimates than isdesirable. This means for the manufacturers and distributors that market shareassessments are in part guessing games and brand manufacturers have onlythemselves, their own previous performances and their own targets to reliablybenchmark against.

The global picture

In announcing their good performances during recent weeks,the global car makers’ Middle East representatives have broadly attributedtheir sales growth across the region to a mix of economic recovery, notablyincluding easier access to bank loans for prospective buyers, plus increasedefforts by car dealerships, and, more than anything, their new model lineups.

At the same time, the Middle East numbers have to be seen inlonger-term regional and global contexts to provide a fuller picture. While theperiod from January through March 2011 produced absolute unit sales records forseveral manufacturers, the comparison with 2010 is somewhat flattering forothers whose sales results in 2007 or 2008 were substantially higher than 2009and 2010 numbers. When measured against peak sales in 2007 and 2008, firstquarter 2011 numbers are good on an industry level but not as impressive as ayear-on-year comparison with 2010.   

In both the downturn of 2009 and in the upswing now,regional results were moreover co-cyclical with global results announced by bigEast Asian, European and American car manufacturers. Kia, for example, said itsglobal unit sales in first quarter 2011 were 20 percent higher when comparedwith a year ago. Under the same comparison, Germany’s Volkswagen sold 14percent more cars and BMW recorded a global increase of 21 percent.

On the global profits side, big manufacturers have alsodisplayed demonstrative smiles. Daimler AG, maker of Mercedes, posted a firstquarter net interim of $1.75 billion [AED 6.42 billion] — a greater than 90percent improvement on the first quarter of 2010. Ford reported a group-widefirst quarter net gain of $2.55 billion [AED 9.36 billion], its highest in the21st century to date, and even Chrysler spread its feathers in pride at the endof April with a net interim of $116 million [AED 426.08 million].

Chrysler, whose twice-tarnished record in recent yearsentailed a 2007 breakup after a failed marriage with Daimler and then a descentinto Chapter 11 bankruptcy protection in the second quarter of 2009, presentedits first quarterly profit in five years or more.

From Japan, ahead of announcements of 2010 results by Toyotaand Nissan expected in mid-May and covering the 12 months to the end of March2011, analysts published expectations that the leading Japanese car makerscould announce 2010 net profits far above 2009 results.

Profits generated in the Middle East region, which are notdetailed in the interim or full-year financial reports of the manufacturinggroups, will only in the rarest cases translate into very visible improvementsto the overall results profile of the automotive groups.

Caught in traffic

Going forward, the remaining months in 2011 could spell theslowing of automotive business on several fronts globally and, to a lesserextent, regionally.

Balance sheets of Japanese car manufacturers are expected toshow the impact of the Great Tohoku Earthquake and Tsunami, which devastatednortheastern Honshu on March 11, in their results for the first six months oftheir 2011 financial year, which began April 1. According to an average ofanalyst estimates compiled by Bloomberg, Toyota’s six-month losses up toSeptember 30 could reach $4.9 billion [400 billion yen]. While progress reportsfrom the car makers Toyota, Nissan and Honda show gradual restoration ofcapacities to pre-catastrophe levels, production of parts and vehicles in Japanwill still be impacted in various forms throughout much of the remainder of2011.

Statements by Japanese manufacturer Nissan as regards theimpact on the Middle East acknowledged the likelihood of vehicle supplybottlenecks choking the market, but without specific projections. Othermanufacturers said they were observing the markets but by the end of April hadnot been revising sales targets for the region. 

In their estimate of overall sales outlook for the MiddleEast, GM expects 2011 to see industry results of 7 percent growth on 2010.Manufacturers contacted by Executive said that unrest in the region hadtemporarily subdued buying moods in some areas of Saudi Arabia and had a directimpact on showroom visits by prospective buyers in Bahrain and Syria, but thesetwo markets do not contribute large shares to regional volume.

However, as Ford Middle East General Manager Larry Preinsaid, events such as the unrest in North Africa (which is not part of theMiddle East region by the auto industry’s classification) had “an impact oneverybody from a customer confidence point of view. This has a ripple effectthrough the [Arab] countries. We will just have to play it out and manage therisks the best we can.”

On the upside, government measures in the important Saudimarket, such as job creation and the infusion of cash into households, couldhave positive impacts on car sales.

 

 

 

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years. Send mail

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