Lebanon and cars have a long and illustrious history together. Many car dealers in Lebanon go back to the 1950s as official importers for some of the world’s best known vehicles. Saad & Trad, for instance, hold the record for being the oldest car importers in the world for Jaguar, when Robert Trad was the first person to import the Jaguar XK120. Michel Trad, director of Saad & Trad and son of Robert Trad, announced in 2008 that, “we have broken the record for all the years that we have imported Jaguars.” Monumental sales have occurred on the Lebanese automotive market: year-to-date most companies are up by over 50%, and for many, sales have seen a 100% increase.
The reason for this dramatic rise in car sales is political (in)stability in Lebanon. Since the assassination of former Prime Minister Rafiq Hariri, pent-up demand occurred, as people delayed buying cars in the tense socio-political environment. This built-up demand was then released when the Doha agreement was signed.
Since Doha, car dealers have not been able to stock vehicles fast enough. Farid Homsy of IMPEX, car dealers for Hummer, Chevrolet, Cadillac and Isuzu, said before the Doha agreement they had diverted many of their cars to the Gulf. “But when the Doha agreement occurred we rushed to stop the diversion of cars and tried to order even more because we saw a super summer coming as the mood in the country was very positive. In Chevrolets, August ‘07 to August ‘08, we have had an improvement of 154%, for Cadillac 134%, for Hummer 117%,” he said.
The gloom of the past three years has now moved on to different shores. Car dealers in Lebanon are no longer green with envy as they watched the GCC’s car sales grow exponentially, year after year. However, the excitement is not overwhelming, as Assaad Raphaël, chairman and general manager for the Porsche Center Lebanon, said while in the region Porsche has grown easily by 10-15%, in Lebanon the company is still struggling to reach the figures of 2005. This is a pattern that is replicated at almost all the dealerships in Lebanon: even with the spectacular growth of 2008, car dealers are still only recovering the lost ground since 2005.
Price responsive?
Lebanon may not have grown as fast as the GCC in terms of car sales but buying trends at the top end of the automotive market are very much the same. Lebanese want to have the newest and most technologically advanced cars possible. Negib Debs, the brand manger for Gargour & Fils car dealers for Mercedes-Benz, explained that this can be a problem for them because “people will stop buying a car if a new model is coming out in a year.” For car dealers in Lebanon, like most of the region, a lot rides on how successful a car is in the period immediately after it has been released. An important difference between Lebanese and inhabitants of the GCC, in the luxury automotive market, are sports cars. As a proportion of sales, sports cars are far more popular in Lebanon than in the Gulf. The Porsche dealership in Lebanon, for instance, despite the Cayenne being an almost iconic ‘must have’ for the Beiruti elite, has one of the best splits in the region. Sports cars and Cayennes are split at 45:55 in Lebanon, compared to a region where the sports cars to Cayenne ratio is 20:80. This is despite road conditions in Lebanon hardly being ideal for sports cars. Raphaël argued that, “Yes, if road conditions were better we would sell more sports cars, but Lebanese roads are great for Porsches because of the winding roads and the way the Porsche handles these roads.” Ultimately, it does not appear to matter what the road conditions are, as Michel Trad explained. “In Lebanon people are not buying many Lamborghini’s at the moment because it is not the right time, not because of the price or the road conditions. If the person can afford a Lamborghini and he wants it, he will buy it, regardless of the road conditions.”
However, road conditions do play a part in driving the trend of the popularity of big SUVs. Unlike in Europe and the US, where the trend for big cars is being moved away from rapidly, in Lebanon, like the Gulf, SUVs are as popular as ever. Small cars like the SMART car, which is doing very well in Europe and America, simply have not got a hope in this market. Debs said that they fought very hard to get the SMART car to Lebanon and are the only country in the Middle East to sell the car. “But we are not selling this car in high volumes. Firstly, because it is expensive due to the safety features of the car and secondly, because people are asking me: ‘You want me to put my son or daughter into that small car? No way!’” he said. Thus it should come as no surprise that huge vehicles such as the Hummer have been a big success on the Lebanese market and are IMPEX’ biggest seller. When Hummer was launched into the Lebanese market IMPEX was unable to get enough units from the manufacturer, even during a time when the Lebanese economy was experiencing a downturn. Now the quota issues have been solved with the manufacturer and IMPEX has just received 40 new vehicles that it expects to shift rapidly. Unsurprisingly, in Lebanon the rise in petrol prices has not affected those at the top end of the market, with regards to the type of cars they buy. It has only been those in the mid-lower quartile buying small to medium-sized cars that have shown a desire to dealers to have a more fuel efficient engine. At VW, for instance, Gergi el-Murr, the Kettaneh VW brand manager, said, “We are experiencing a move to smaller and more efficient engines … habits are changing.” However, Negib Debs also said, that at Mercedes they are also beginning to see a shift from six to four-cylinder cars, which suggests in the future Lebanon will see a general shift to smaller more fuel efficient engines in all segments.
Thus, in the Lebanese market and the Levant in general, and much more so than in the GCC, car importers are expecting more emphasis to be placed on fuel efficiency. For all those people that are buying more fuel efficient cars the benefits can only be seen if the cars are driven in “a stable manner,” stressed Gergi el-Murr, the VW brand manager. “Driving in a stable manner” is unfortunately not what the Lebanese are known for when it comes to their driving abilities. Road safety is one of the major reasons full-size SUVs are so popular in Lebanon. As Farid Homsy of IMPEX explained, “with SUVs of course people want to avoid big engines but the trend in this segment has not been directly affected by the fuel hike because this type of consumer is researching safety and comfort for their families, rather than fuel consumption.” The demand for safety has also led to an increase in the number of new cars bought. The Lebanese have often been adept at importing used cars and selling them to each other. Now, Jamil Selim Ramadan, a certified clearing agent for the customs authority, said that, “the Lebanese Importer Association has done very well in convincing the Lebanese of the advantages in buying new cars in terms of their safety and the guarantees that come with the car.” In the past the Lebanese car buyer has been reluctant to ‘mortgage’ his car but now bank facilities are becoming easier to access with many different packages and this has helped people purchase new cars. With interest rates currently low it also means that there is a good climate at the moment to buy new cars and this has been articulated in the current market atmosphere. Further to this, buying used cars with no guarantee and little known history is a major safety and reliability concern of which the Lebanese are becoming more aware, through the work of the Lebanese Importers Association.
“Crisis managers”
Identifying the type of cars the Lebanese will buy and encouraging the consumer to purchase a vehicle is one thing. Identifying when people will buy the cars and trying to cope with the domestic political and economic situation in Lebanon is quite another. Subsequently, the biggest challenge for Lebanese car dealers is projecting into the future. Nabil Bazerji, the managing director of Bazerji & Sons representing Maserati, Suzuki and Lancia, explained that to cope with change they never commit over a year. “Managers in Lebanon are crisis managers and the best in the world. This is because there is no similarity in changes that occur; we always have to adapt,” Bazerji said. Manufacturers on the whole have encouraged car dealers in Lebanon to be bullish about their projections and helped local car importers in Lebanon follow the philosophy of adaptation. In the May crisis T.Gargour & Fils cancelled a shipment of 100 Mercedes that were to be delivered. “Luckily, Mercedes is very supportive and have forced cars onto other countries when times have been bad and also have forced cars from other countries here when times are good,” Debbs explained. Currently, Lebanese car dealers are looking nervously at the horizon despite the extremely positive sales environment at the moment. Next year’s general elections, and the potential unstable political environment these elections could bring, are coming all too soon and there is fear in the market as to how the global economic crisis will affect Lebanon.
Bazerji is concerned, saying that, “Lebanese all over the world were hit and we need their money in the economy, but thank God the country was not too heavily involved.” So far though, Lebanon has gotten off lightly and even had some positive affects as Lebanese expatriates and Arab nationals transfer parts of their massive assets to Lebanese banks. Despite this, the affect will still be felt. “There is not a person that I know that has not lost money in trading but we just don’t know how much this is going to affect us and so it will be very complicated next year,” said Negib Debs. Regardless of the uncertainty on the market there is unanimous sentiment that Lebanon can sell more cars and subsequently most of the importers are seeing significant expansion to their infrastructure. In October of this year Bazerji & Sons opened an after-sales facility for its three brands spread over 400 square meters, one of the biggest in Lebanon. Kettaneh, the dealership representing VW, has just opened a new showroom earlier this year, Porsche has recently opened a new pre-owned center and Saad & Trad are making significant expansions to their showrooms for Bentley and Lamborghini. As well, T.Gargour & Fils had planned to build a new showroom but this has been delayed since the 2006 War.
Looking ahead
Despite Lebanon’s constantly fragile political situation and widely fluctuating market, currently there is confidence in the automotive sector. If the domestic political scene remains stable and the affects of the global financial crisis are mitigated, Lebanese car dealers can expect to continue their bullish expansion in both infrastructure and sales. The trend to buy large SUVs and other gas guzzling automotives will continue to be popular until serious rises in petrol occur and better road safety is implemented. The government has shown signs it is getting serious about road safety with a recent aggressive campaign on illegal parking and passenger seatbelts. But more will be needed to significantly improve safety on the streets. However, there will be an increase in sales of mid-sized SUVs that will increasingly come onto the market and there will continue to be a trend of a gradual shift to smaller, more efficient, engines. Local car importers in Lebanon will be hoping that they are moving to a greener future, but most of all to a calmer one.
