The United Arab Emirates (UAE) automotive market continues to outperform regional peers and is one of the fastest growing markets in the world, according to BMI's latest UAE Automotives Report. Car sales in the UAE rose by 37 percent year-on-year (y-o-y) in the first half of 2008, the highest growth among the markets of the Gulf Co-operation Council (GCC). According to data from the Middle East Automobile Council (MEAC), total GCC sales were up by 26 percent y-o-y, which reflects the strength of the automotive industry in the region, when compared to the global car sales growth of just 0.8 percent. Some brands have performed exceptionally well in terms of growth, although dealers are reluctant to disclose sales figures. The Al Rostamani Trading Company said that Suzuki sales in the UAE were up 197 percent y-o-y in the first half of 2008. Volkswagen also reported strong sales growth of 69 percent y-o-y, which far exceeded its 42 percent growth for the Middle East as a whole. Meanwhile, General Motors' UAE sales grew in line with the overall market growth of 37 percent y-o-y, with total sales of Chevrolet, Cadillac, GMC, Hummer and Saab to reach 11,972 units. The premium vehicle segment boosted sales in both the UAE and GCC. Premium car sales in the UAE have grown by 56 percent between 2005 and 2007 and the segment now represents 12 percent of the country's auto market by volume and 24 percent by value. The UAE accounts for 40 percent of the GCC's luxury sales, with Saudi Arabia contributing 21 percent and Kuwait 14 percent. By 2012, passenger car sales in the UAE should reach just under 534,000 units, a 80 percent rise over 2007 levels. Growth will be fuelled by population growth, expansion of road infrastructure and rising income. In a country where the cost of living is accelerating, the market will be increasingly price responsive, giving non-luxury brands potential for growth through their top-of-the-range models, which tend to be priced lower than their luxury brand equivalents. BMI expects price discounting in an increasingly competitive market, with the exchange rate set to determine demand, giving US manufactured vehicles an edge over European and Japanese rivals. The fierce competition in the auto finance market, a key variable when looking at new car sales, has materialized in flexible contracts (particularly on the repayment period, now usually extending beyond five years). The car finance market in the UAE was worth an estimated $6.2 billion in 2007, based on car financing of 72 percent of the value of vehicle sales. However, the UAE market is characterized by a high proportion of expatriates (the consumer segment most likely to go for the cheapest financing available) and work visas are not usually granted for more than three years, thus offering credit at higher maturities, conveying a considerable default risk The UAE scores 58.9 points (out of a theoretical maximum of 100) in the BMI automotive business environment rating this quarter, up 2.6 points over the previous quarter. This puts it 8.8 points behind Turkey and 1.5 points ahead of Saudi Arabia. Lying in second place, the UAE is the fastest growing automotive market in the GCC, its score improving as a result of the strong performance seen in H108 and an upward revision in BMI's sales forecast, although the rise was dampened somewhat by a decline in the country's overall economic and political risk ratings. The UAE is likely to secure its place as a regional car retail hub. Recent investment liberalization in Abu Dhabi, the federation's largest Emirate, is a welcome development, but the country is unlikely to become a mass car producer over the next five years. Further liberalization of property ownership and investment regulations would improve its ranking. __
