Automotive sales stuck in slow lane as new models awaited

New car sales in the UAE seem to have caught a chill during December and have put a dampener on the pace-setting growth numbers recorded in the previous two months. It has also come as a rude jolt for local dealerships who were expecting a strong finish to the year and compensate for the less-than-stellar showing in the second and third quarters. The drop in December was most noticeable in the small and mid-sized categories, but demand for premium models and SUVs continued to hold their own as has been the case right through the year. A couple of the leading dealerships recorded drops of more than 10 per cent this month which, going by the demand in October and November, can be deemed quite precipitous. To compound matters, fleet operators were also not placing sizeable orders, preferring to wait until January. Effect of Europe tidings Article continues below "We were banking on some of the new model launches to pull through with a strong December showing to both individual and corporate buyers," said a marketing manager at a dealership. "That it has not happened could have a lot to do with buyers getting spooked with the tide of negative news from Europe. It's imported negativity rather than anything related to a local concern." However, Felix Welch, director of sales and marketing at Arabian Automobiles Co., suggested not much should be read into the December performance. "Over the years, we have observed a general trend for local automotive sales to experience a weak demand during the month of December for various reasons," said Welch. "Anticipation of the deals to be offered during the Dubai Shopping Festival period delaying customer purchase decisions is a good example… especially as next year's event has been brought forward to the beginning of January." He may have a point there — it was during DSF 2011 that car buyers broke the shackles of the recession-induced torpor of 2009 and 2010 to start heading back into showrooms all over again. That momentum held until May 1 when Central Bank guidelines on a mandatory 20 per cent down payment on vehicle sales came into effect. The resulting drop continued well until October. "It has been a topsy-turvy year for the car industry, but the good months showed enough legs to ensure that 2011 would be the best year for the industry since 2008," an industry official said. Now, all eyes are on what DSF 2012 will have to offer. The market can expect some pretty aggressive manoeuvring on promotions from the many dealers. Buyers will also be enticed through further model launches during the first quarter. "Our main new launches for first-quarter 2012 will be the all-new BMW 3 Series and the sixth — and totally new — member to join the Mini portfolio — the Mini Roadster," said Dr. Joerg Breuer, managing director of BMW Group Middle East. "Two very important launches for the brands, which we expect will help ensure that we have a good start to the New Year." BMW's regional sales up to November are up 9 per cent, and Breuer expects them to be maintained for the full year. Favourable lending terms A good start to the year is absolutely vital for the wider industry. Bank lending rates are still in favourable territory, but the dollar's near-term movements — as well as any policy directives from the US Federal Reserve — will need to be watched very closely. Any increase in the cost of local borrowings would have an immediate and telling impact on demand in the crucial entry and mid-sized vehicle categories. Another big concern would be how businesses based here would do on their fleet programmes. "Some of the regional operations of European companies have already indicated a belt tightening," said an official with a dealership with sizeable corporate clients. "However, rent-a-car companies might help with higher volumes because of the improved tourist inflow. It's a mixed bag we have now." Arabian Automobiles Co. is preparing for a series of launches next year, including full model changes. "Some of these models fall in the popular small and mid-sized segments and will be introduced in the market with segment-leading specifications," said Welch.