Geared for the Gulf

The Middle East is a unique environment for the automotive industry. Where the North American, European and Australasian markets have a number of similarities and, subsequently, transferable strategies, the Middle East requires a full tactical rethink. The distinctive characteristics of the marketplace must be taken into account when devising this strategy. The most relevant of these features to the private car industry are the incessant heat, poor road infrastructure and relative lack of public transport, coupled with the cheap price of fuel and greater disposable income.

The heat of the desert, especially in the height of summer, means that most people want to move seamlessly from their air-conditioned home to their air-conditioned car to their air-conditioned destination. Even despite the poor state of the roads and traffic problems that permeate the area, local residents take to their cars. Although the current lack of a good public transport system is a sound reason for using private transport, the projected uptake of metro and train initiatives is uncertain as climate conditions will remain problematic. Regardless of how encompassing a light-rail system is, commuters will still have to walk to their local station and wait for the next train. Plans are in place for air-conditioned walkways to lead up to the new metro stations in Dubai but braving the relentless heat and breaking the habit of jumping into a waiting car will be a big challenge.

General trends can be observed in Gulf customers, not just because of the inclement weather and traffic conditions. As Phil Horton of BMW Middle East says; "We have in the region what we call the inverted triangle." In the more traditional markets, the lower end products sell in the highest numbers, tapering towards the upper end of the market. Conversely, in the Gulf States the highest sales levels are amongst the premium product with fewer people choosing to purchase lower-specification cars.

He cites several reasons for this but the most telling is the taste of the Middle Eastern customer; here, the car is much more of a status symbol. "The car in the Middle East is less of a tool, as it might be in Europe, and more of an expression of your personal values and personal gain. Many of our customers aren't afraid to display that," Horton continues. "They have the disposable income to have the best. The market is very much, in our segment, driven by bigger cars and more powerful cars." Ulrich Urban of Chinese car firm Haima agrees with this observation: "The car remains a status symbol and will stay this way. A car can say what sort of person you are."

While the affluence in the Middle East continues, those in the automotive industry do not see this preference changing. "People will not give that up until they are really pinched in their income and I don't see that happening," Urban says. The penchant for luxury, generously-proportioned cars will endure.

The structure of the car industry itself is very different here too. "The GCC is very different, not only are we talking about 14 countries being in the Middle East region, two of those countries are currently closed because they are Iraq and Afghanistan. The structure that we have in the other 12 is that each one is run by an independent importer rather than what we call a national sales company structure." This means that the relationship between car manufacturer and dealership owner is more important and can create differences that require more careful management to ensure a consistent brand image. Moreover, the Middle East forms a very densely packed market with millions of cars on the road in a small area. Though this is arguably the root of the traffic problems, it also fosters a healthy economy for dealers in the area.

Two main themes kept cropping up in discussions with each of the automotive representatives: The Gulf market is becoming increasingly aware of environmental issues affecting the industry and the products available for sale here ought to be targeted to the specific requirements of the local customer.

Environmental Considerations

Since the discovery of oil in the region, the Gulf States have embraced the easy availability of cheap energy. This has been positive for the car industry and is one of the reasons that gas-guzzling SUVs remain a popular choice. It is a different story in the European and American markets where government-imposed environmental taxes and public opinion have turned against less efficient cars. "The big-engine cars don't sell as well in Europe because of fuel economy, emissions and the fact that, in some parts of Europe particularly, there's almost been a bit of a backlash against driving very big engine cars," says Horton. "There is an ever increasing trend in Europe and in some parts of North America towards customers being much more environmentally conscious."