Up to 95,000 cars sold on grey market in UAE in 2013

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(Photo for illustrative purposes only)

(Photo for illustrative purposes only)

Up to 95,000 vehicles are likely to be sold on the grey market in the UAE this year, with some right-hand drive cars being converted to left-hand drive models, according to UAE-based dealers.

The influx is expected to create “a huge problem” for the country’s car dealers, they said.

“[The grey market] is one of the biggest challenges we have today... It is not less than 20 percent to 25 percent of each brand,” Michel Ayat, CEO of AW Rostamani Automobiles, which sells Nissan, Renault and Infiniti brands, said at a media roundtable on the automobile industry organised by HSBC on Tuesday.

With industry forecasts predicting the number of sales this year will rise to 380,000, if Ayat’s estimate proves accurate, it will put the number of vehicles sold in the country this year on the grey market as high as 95,000.

“We have a huge problem with the grey market,” said K Rajaram, CEO of Al Nabooda Automobiles, which holds the UAE dealerships for Volkswagen, Porsche and Audi.

“Especially when you launch a new product and there is a time lag between the launch in Europe and the launch of the product in the UAE, everybody wants to be the first person to own that car and that’s where the grey market comes in,” he said.

“The first Audi R8 which was sold in the UAE was sold for AED1.9m ($517,288), the cost of the car is AED500,000 ($136,128), that is the difference. It was flown in from Germany overnight and sold the same day it landed in Al Ain.”

Rajaram also claimed some illegal dealers were bringing in right-hand drive cars from Japan and converting them to left-hand drive models for use in the UAE. “They have changed the car from right-hand drive to left-hand drive but they could do the dashboard so all the instruments are facing the wrong way... but it is AED40,000 cheaper [than official models],” he claimed.

“I think it is one of the biggest challenges we have got,” agreed Karl Hamer, managing director of Al Habtoor Motors, which sells Bentley, Bugatti, McLaren and Mitsubishi. “The government needs to control it,” he added.

“In the 90s we used to go to the Dubai Municipality to get the people to close the showroom displaying [grey market cars],” Ayat said. “Now the manufacturers turn a blind eye and are not interested and don’t protect you and the regulations don’t protect you.

“This is something big... We have discussed it plenty of times with the Ministry of Economy. It is affecting us and the only response that we have in the absence of protection is to improve our system and processes and services and customer engagement,” he said.

Despite the impact of the grey market, car sales are strong in the UAE. Middle East Automotive Council (MEAC) figures have estimated sales this year will be as high as 380,000, up 23 percent on 2012 and 40,000 more than in 2008.

Sales in the first four months of the year were around 118,000, up from 96,000 in the same period in 2012. Ayat predicted sales will “sell more than the peak in 2008”. On the back of this increased momentum, all the dealerships have reported a surge in sales.

Rajaram reported Al Nabooda Automobiles has seen a 45 percent year-on-year rise in first quarter sales during 2013, with up half of sales coming from new residents arriving to live in the country.

Hamer said Al Habtoor Motors was on target to sell 450 Bentleys this year, compared to just 86 in 201o. He estimated it would achieve 1,000 Bentley sales by 2015.

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Please post responsibly. Commenter Rules

Posted by: Colliven

sorry but anyone can help me out that how to get a MEAC report about the car sales / automotive market in ME? Thanks a lot.

Posted by: Ulevpri

All your comments are not valid.
A dealer in the UAE has to accept the prices given to him from the regional office of the brand.
The problem is, that still the dealers in the UAE have to pay much higher prices for the cars as- for example- a dealer in Oman or Kuwait. Thats not fair, but not the fault of the dealers. I know they raised this subject many times to their regional offices, but still Manufacterers want to make the most money in rich countries as like the UAE. Of course the brands know exactly, that they can sell the car with a much higher price in the UAE than for example in Oman, because the per capita income is much higher in the UAE than in Oman. You all compare apple with pears and if the problem would have been on the dealers only, you could be sure the first ones did already decreased their prices. But non of them can do so due to the high prices they have to pay themselves for the units...

Posted by: Ulevpri

@Hisham,
not my comment is incorrect, it is yours. If you would know what you are talking about, than you would know as well that mostly all the official dealers in the UAE as like Al Habtoor are having contracts with the Brands since many years and generations. Unfortunately, for the brands there is no need to revise this contracts given to this distrubtors incl. better prices as they do with new dealers/distributors. For the main dealers it is very tough to compete since the regional Offices simply dont want to adjust the contracts (of course not its a huge profit we are talking about) while the new dealers getting prices which are fitting the current market. I am in the automotive industry and know that this is an ongoing fight between the "sole" distributors which are suddenly not "sole" anymore without even asking them, and the regional offices of the respective brands.
Do not argue if you have no information which is correct to enter a discussion.

Posted by: Hisham

@Ulevpri This explanation of yours is completely incorrect. The sole reason is that they know noone will be able to compete with them, thus artificially raising prices.
@Tony I think in your case this has a lot to do with Ali & Sons being more realistic about supply and demand. For example, in most countries the price difference between the previous A8 and the new one was pretty much negligible. However, Nabooda managed to increase prices hugely on the new or facelifted models on the back of economic optimism (speculating that they will sell more cars) and perhaps on their new fancy showroom. Abu Dhabi is still a more traditional market with low demand for VW/Audi/BMW and other brands that are not Japanese or Mercs. So they have to compete with the traditional brands based on pricing. If I don't switch to Merc I will definitely go for Ali & Sons...

Posted by: tony

And why is the same VW sold by Ali & Sons cheaper than the same VW sold by Al Naboodah in Dubai?

Furthermore, if you're an Etisalat employee, you get a 20% discount on BMWs from AGMC. Can you imagine the profit margin they have??!??!

Posted by: ADP

I really pity the automotive industry...........how terrible if their last resort is to be forced to "improve their systems and processes and services and customer engagement?. Can you imagine that!! How can they be expected to do that..........? Actually do something other than only being a "shipping" company.
It's pathetic to even make such statement, but it is so indicative of the attitude of the conglomerates who are keen to take the consumer's money, but not so keen on providing proper service.

Posted by: Monopoly

Great Point What they mean is we don't care about customers unless there is a need for it.
Statement says it all.
Monopoly is not a good thing, there should be more dealers allowed to sell so that customer has options. In the present situation dealer is the only winner.

Posted by: M/T enthusiast

The dealers are equally to blame for this situation. They sell only certain trims at higher than regional prices , when you can cross the border into Oman and buy exactly the same product for 30-40,ooo dirhams less.Then there is the horrible after sales service ...(lets not talk about warranty packages) and not to mention the monopolies of dealerships.

Local dealers can easily sort this problem by reducing their product price tags , instead of pointing fingers at grey market importers who also have legitimate licenses permitting their activities. The govt could also open up the dealership markets but we all know thats not going to happen.

Posted by: prado

the dealerships in Dubai are lazy sore losers how cant handle competition......

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