with the GCC achieving record income from ever-rising oil prices, assessed to have amounted to $300 billion in 2006, and the UAE’s per capita income standing at $35,000 the country’s automobile sector is riding the wave, and in terms of growth is now considered to be among the top emerging markets next to China and India. Within the GCC, the UAE automotive sector ranks only second in size behind Saudi Arabia.
As behooves a country flush with money and a culture of conspicuous consumption, luxury cars are taking up a significant share of the overall automotive sector. Of all the cars with a $100,000+ price tag sold worldwide, around 5% go to the Middle East, and the vast majority of those in the GCC. According to international analysts, until 2009 the luxury segment will even rise by over 10% in the region, whereas globally it will decline.
The demand for luxury cars is now so high that many brands have waiting lists of up to one year. Some customers can’t wait that long and pay dealers extra fees to get a car from Europe and ship it to the Gulf. Hotels, many of whom are catering to high-end customers, are now also ordering luxury cars for their fleets. All this is exciting news for luxury car brands.
Since December 2007 Bugatti, owned by Volkswagen, has sold 15 of its $1.2 million 1,001-horsepower Veyron coupes in the UAE alone. Rolls Royce’s sales in the Middle East rose by 36% in 2006, making up 15% of its worldwide sales of around 800 cars.
Porsche celebrates the 5th year in a row of double-digit growth in the Middle East and Africa. Only eight years after opening the Porsche Middle East & Africa office, it became the fifth-largest Porsche subsidiary worldwide, after North America, Germany, the UK and Italy. The German car maker, whose current sales in the Gulf are around 3,800 units, expects a 20% increase. Of its models, the Cayenne SUV alone accounts for 75% of its sales in the GCC. According to Deesch Papke, Managing Director of Porsche Middle East & Africa FZE, “The market demands an extremely rich product mix that is certainly a specialty in our region. We sell more 911 Turbo than Boxster or 911 Coupe. There is a strong demand for very high exclusive equipment.”
The American brand Cadillac can look at a presence in the Middle East that goes back all the way to the 1920s. For a long time it had been the vehicle of choice for royalty, senior government officials and businessmen, thus generating a loyalty on which the brand could build and expand today. From 2001 to 2006, regional sales have doubled and reached 2,449 cars, making up almost 10% of Cadillac’s global sales. Figures to date for 2007 are showing a 35% increase over 2006.
The venerate British car maker, Bentley, has seen a staggering 1,000% growth over the past four years, yet now reached its global production capacity — just under 10,000 per year — and thus will over the next five years actually see its regional sales decline from a peak of 500 cars in 2006. This is part of an overall strategy to maintain exclusivity, yet necessitates a “re-training” of luxury car dealers to stop sneering at the used car market and convince customers that a “pre-owned” Bentley, of which there are 3,000 in the Middle East, might actually be something desirable. A significant target group in the UAE are expats as they are more likely to buy used cars than nationals.
The new kid on the block
In comparison with other brands, Maserati has made its entrance into the UAE market fairly recently, having been present only since 1998. But the local market quickly became important enough for the Italian car maker so that in 2004 it decided to stop managing the brand in the Gulf via intermediaries and in 2006 created a regional office in Dubai to be able to directly take care of the customers’ needs and wishes. In relation to its increase in global production and sales (from 5,500 cars in 2006 and 6,500 in 2007, the target for 2009 is 12,000 cars, the maximum production capacity), the brand’s regional numbers have risen even faster. After selling around 150 cars each year during 2004-05, this year Maserati expects to sell 400 cars, a 40% increase, and plans to raise that number by another 80% in 2008, thus pushing its market share in the luxury car segment from 6.5% to 10%. According to Umberto Cini, the brand’s area manager for Middle East and South Africa, Maserati’s ultimate aim is to “become the credible alternative to the mainstream players in the luxury segment, producing passionate and innovative 2-door and 4-door vehicles, focused on delivering market leading customer service.”
The luxury car sector does not only attract local buyers of vehicles, but also buyers of brands and assembly lines. In March 2007, Aston Martin, best-known as “makers of James Bond’s cars,” was bought off Ford for $925 million by a consortium mainly funded by two Kuwaiti investment houses, The Investment Dar (TID) and Adeem Investment. Initially, this is nothing but a regular investment in a promising brand. Certainly there are no plans in the GCC to produce cars en locale, like others in the region do — Iran, for example, is the world’s 16th-largest car manufacturer — and the local car industry will remain the realm of post-sale maintenance and augmentation. But Gulf participation in luxury brands might influence future design, or at least help brands to better target the wishes and needs of Gulf customers.
Influence on design
Since luxury car owners tend to be the most discerning of buyers, the luxury car brands pay extra-special attention to their potential clients’ wishes. Thus, Mercedes puts an emphasis on making its vehicles resistant against the specific local environmental conditions, such as sand and humidity. General Motors, owner of Cadillac, sent its vice-president for Global Product Design twice to the region in 2007. Phil Horton of BMW avers that “our design department is very interested in following Middle East trends with a view of developing special models, colors and trims.”
All luxury cars have elaborate customization programs, some of which, like Bentley’s Mulliner, go back over a century to the early history of the brand. Maserati introduced specific model versions and offers more than 4 million combinations of options. Mercedes has its Designo range and its performance division, Mercedes-AMG, has opened its own Performance Studio. Most high-end luxury cars are essentially tailor-made.
Competition
Despite so much money chasing a limited supply of luxury cars, there are too many brands represented in the markets to just sit back and wait for customers to sign their checks. Thus salesmen are coming up with their own unique ways to differentiate themselves from “the rest of the pack.” In the luxury segment, all cars are expected to have been built to highest quality standards and fulfill the most rigid international standards in terms of safety, so brands need to go further. In neighboring Saudi Arabia, Bentley is sending buyers on a two-day tour of the home factory in Manchester, where they can see how the cars are built. Umberto Cini of Maserati drives his brand’s strategy to attract buyers through exclusivity, but the Italian car maker has also responded to market demands by producing its first automatic transmission vehicle, the Quattroporte Automatica that saw its debut in early 2007 and will be joined, at the Middle East International Motor Show in Dubai in November, by the brand-new GranTurismo.
The German carmakers can, of course, count on their reputation for flawless engineering and ultimate reliability and are often building their image on these “Teutonic” qualities. Thus BMW, which in 2007 is selling 15,000 units throughout the Middle East and has just passed the 100,000-car-mark since opening a dedicated regional office in 1994, points out its superior technology and counts on “an ever increasing appetite for the highest level of technology safety and innovation.” Mercedes invites regional representatives to its car clinics and conducts hot weather testing for its models in the Middle East.
Cadillac, whose marketing manager, Melanie Maddux, acknowledges that “generally, European products are perceived as higher quality than other offerings in the market,” nevertheless avers that her brand has been using the distinctly American attitude that “the competitiveness of the segment benefits consumers who are able to find [a] better and better product.” And Maddux thinks that Cadillac “stacks up extremely well.”
Going Green?
One aspect of global car culture that has yet to make real inroads into the UAE and Middle East market is that of “greener” cars. With petrol being cheap and incomes high, there is no economic reason for local drivers to concern themselves with fuel efficiency and hybrid engines. However, local governments are increasingly taking environmental concerns into consideration. Dubai’s ruler has mandated that all new government buildings in the emirate “go green” and the overall government strategy aims for sustainable development, environmental protection and greener infrastructure. The emirate is also investigating hybrid public transport systems and Abu Dhabi is introducing cleaner diesel fuel. In June 2007 Dubai’s TECOM Investments launched enpark, a green energy and environment park project, which not only includes businesses, residences, and retail space based on sustainable development and clean energy, but also mandates that its inner area may only be accessed by cars that run on natural fuel. With projects like this, TECOM hopes to attract hybrid or biofuel cars to the UAE, for which, according to enpark’s director Ali Bin Towaih, there is already a market.
Although luxury cars are more associated with large engines and high outputs of power, and with it emissions, some of the high-end brands are actually leaders in green technology and see raising customer awareness for environmentally-friendly cars as part of their corporate social responsibility.
there is no economic reason for local drivers to concern
themselves with fuel efficiency
Porsche proudly points out that the world’s first hybrid car was developed and produced in 1900 by the company’s ancestor, Ferdinand Porsche and that today all its engines are able to run on a certain share of ethanol, the best-selling Cayenne up to 25%. BMW is looking forward to introduce its own technologies, like Efficient Dynamics, to the regional customers, waiting for an increase in customer awareness. Cadillac will present its Chevrolet Tahoe hybrid at the 9th Middle East International Motor Show in Dubai that will have a focus on energy diversity.
With the rapid increase in luxury cars, the UAE is now also facing a new problem, which so far was only known from news stories about Eastern Europe or movies like “Gone in 60 Seconds”: luxury car theft. In September 2007 the Abu Dhabi Police arrested a gang that had specialized in stealing luxury cars, especially 4x4s. The thieves were tech-savvy — being able to overcome the burglar alarms and then decoding the operation switches — and worked for foreign “buyers”. It remains to be seen if this problem becomes more serious. One thing is for certain: it will not deter potential buyers from getting the latest Porsche, Benz, or Bentley. Only now the brands might make sure to add Low-Jack to the basic options.
