UAE auto industry seen contracting by 8.5% in 2009

The car sales industry in the UAE is facing a tough 2009 and is predicted to see negative growth of 8.5 percent, according to a new report published on Monday.

Business Monitor International (BMI) has revised its forecast for the country’s auto industry from 2.9 percent growth to a contraction of 8.5 percent as dealers continue to feel the impact of the global economic slowdown.

In its new report, BMI said the worldwide downturn was “likely to bring an end to the robust growth the UAE has registered in recent years”, adding that it was likely that some consolidation would take place within dealerships.

However it added that there were “encouraging signs in the market” that suggest a recovery may not be far off.

Dealers in the UAE are facing unsold stock and dwindling profit margins as consumers pull back, BMI said, adding that it saw 2009 sales of around 324,900 units.

“However, even in the current global economic scenario, manufacturers continue to focus their attention on the Middle East, which has been one of the more resilient markets for autos when compared with North America and Europe,” the report added.

While a sales contraction is on the cards this year, BMI believes that the market will rebound in 2010. “We are encouraged by signs that the credit situation is improving. In addition to offering the opportunity to lease vehicles, dealers are teaming up with banks to provide autos loans to buyers who wouldn’t normally be able to qualify for a loan,” the report said.

It added that while new car sales may be slowing, the UAE remained a robust market for luxury sales although sales in the segment have not been immune from the downturn.

BMI said it remained optimistic over the forecast period, which concludes at the end of 2013. “We expect the recovery to begin next year and accelerate as growth picks up. Sales should reach 422,145 units, an increase of 18.9 percent over 2008 levels.”

The research company added that it expects to see some consolidation within dealerships, with smaller firms at risk of going out of business and larger dealerships taking on their sole distribution rights.

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