A surge in car sales across most Arabian Gulf countries underlines the momentum behind the region’s consumer spending boom, and sales are likely to continue rising strongly for at least a few years, industry executives say.
Car sales are an important indicator of business activity in a region where official macroeconomic data, such as GDP, is often unreliable and released with delays of many months.
Analysts estimate GDP in the richest Gulf Arab economies – Saudi Arabia, the UAE, Kuwait and Qatar – is now growing at annual rates of around 3 to 5 per cent, fuelled by high oil prices and heavy government spending.
“Sales are 17 per cent up so far [this year]. It will be a good strong end of the year as well,” said Trevor Hill, Audi’s managing director for the Middle East.
Audi, the luxury arm of Germany’s Volkswagen, sold 9,155 cars in the Middle East last year; the UAE accounted for more than 40 per cent.
In January, the company predicted that 2013 sales in the region would rise 12 to 15 per cent.
Official industry-wide numbers are not available, but because of consumers’ high average incomes and ultra-low, subsidised petrol prices, car sales in the Gulf are skewed towards upmarket brands and large sport utility vehicles (SUVs), in comparison with Europe and many Asian markets.
Britain’s Jaguar Land Rover (JLR), a luxury car maker that India’s Tata Motors owns, saw a 38 per cent year-on-year jump in Middle Eastern and North African sales for the first nine months of this year, with the UAE and Saudi Arabia its top two markets.
“The economy has been very strong and a lot of the markets in the Middle East are doing very well generally,” said Robin Colgan, JLR’s managing director for the region.
One reason for strong consumer spending growth in some Gulf economies, particularly the UAE and Kuwait, is a recovery of real estate and equity markets from the global financial crisis; this has made customers feel richer.
Dubai’s foreign trade in motor vehicles rose 18 per cent to Dh32 billion in the first half of this year, with Japan accounting for a quarter of the total followed by the United States, according to the emirate’s customs office.
That number includes re-exports as well as imports; the six GCC countries do not produce passenger cars of their own, and Dubai imports many cars that are subsequently shipped elsewhere in the Middle East and Asia.
Car makers are keen to expand sales in the Gulf partly because they face overcapacity and price pressures in Europe, which has been hit by the euro zone’s debt crisis.
Opel, a German unit of US car maker General Motors, exhibited at last week’s Dubai motor show for the first time in 15 years, after entering the UAE market in February.
“We are back now after 15 years and clearly identified the Middle East as a growth region,” said Lutz Jäckel, the director of sales, marketing and after-sales at Opel International Operations.
“We expect in the region average growth of the car market of 10 to 15 per cent, and we want to participate.”
Rival US car maker Ford Motor said on Tuesday it planned to launch 17 new or refreshed Ford and Lincoln vehicles in the Middle East over the next two years to accelerate growth in the region.
“In the Middle East over the last four years it is growing by 60 per cent. Our forecast is that by 2020, the industry could reach about 5.5 million units, so that is another 40 per cent growth on top,” said Stephen Odell, the president of Ford Europe, Middle East and Africa.
New car sales in the UAE are likely to surge to 380,000 units this year, up 23 per cent from last year and above the 2008 peak before the global credit crunch, according to the Middle East Automotive Council, an informal body of car makers in the Gulf.
* Reuters
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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THE BIO
BIO:
Born in RAK on December 9, 1983
Lives in Abu Dhabi with her family
She graduated from Emirates University in 2007 with a BA in architectural engineering
Her motto in life is her grandmother’s saying “That who created you will not have you get lost”
Her ambition is to spread UAE’s culture of love and acceptance through serving coffee, the country’s traditional coffee in particular.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
Engine: 1.5-litre 4-cyl turbo
Power: 194hp at 5,600rpm
Torque: 275Nm from 2,000-4,000rpm
Transmission: 6-speed auto
Price: from Dh155,000
On sale: now
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Bio:
Favourite Quote: Prophet Mohammad's quotes There is reward for kindness to every living thing and A good man treats women with honour
Favourite Hobby: Serving poor people
Favourite Book: The Alchemist by Paulo Coelho
Favourite food: Fish and vegetables
Favourite place to visit: London