GCC car sales down 30% in 2017, compared to already-bad 2016
A new report claims that first-quarter new-car sales in the GCC for 2017 are down by 30% compared to the same period in 2016. And new-car sales in 2016 overall were already down by around 27% compared to 2015.
The Autodata Middle East report mentions cost-cutting and job losses at automotive distributors due to lower sales. By the end of Q1 this year, the report says the GCC experienced a 30% drop in new car sales year-on-year, with Bahrain alone at 41%, followed by KSA at 38% and UAE at 28%.
The report says “this decline in activity resulted in dealers and distributors holding too much stock of both new and used cars. By the end of Q1, we saw the increase in consumer offers as the industry tried to generate showroom traffic. The manufacturers increased their financial support on new cars which then put pressure on their certified pre-owned car pricing which made them uncompetitive.”
“By the end of April, industry insiders were already pinning their hopes on a good Ramadan period for car sales. The offers were launched prior to the start of the Holy month and were even more generous than previous years….The elephant in the room was the fact that in real terms, new cars became cheaper. This had the effect of making Certified Pre-Owned cars look even more expensive and so sales of these slowed. As long as the manufacturers continue to push new cars into a shrunken market their residual values will fall.”
“While it is still too early for any firm numbers the feedback we have received from our contacts indicates that the Ramadan/EID period did see some increase in showroom traffic but sales levels were just classed as normal. As expected, those with the “biggest” consumer offers reigned supreme is the indication so far.”
With VAT due to be introduced at the start of 2018, Autodata believes this will create demand for a typical CPO (Certified Pre-Owned) car. “The VAT treatment of a used car is considerably different to a new car; the nearly new item will be seen as a more affordable option. This should be a great opportunity for the more professional operator to drive sales and rationalise the inventory levels”, said Ian Batey, General Manager at Autodata Middle East.
“We know some analysts are stating that there will be a rush to buy new cars before VAT is introduced. Our view is somewhat different in that most new car sales are already discounted to more than the 5% rate of VAT and so the consumer offers will be realigned to “we pay the VAT” so that the end result for the consumer is the same.”
Autodata claims this is not a “downturn” but a market correction for the last 6 months. “This correction has been 18 months in the making and we believe that this is the new normal”, said Ian Batey. “The market has now stabilised. We do not forecast any market growth until 2019 and then only a modest 5%.”
Their message to industry is to concentrate on maximising market share and promote CPO rather than chasing non-existent growth. Stating the obvious, their advice to the consumer is there has never been a better time to buy.
Comments
samer
until the greed of dealers here is done, sales will keep declining, people here used to change cars just for the sake of change, but these days are gone and the reason is clear which is awareness, 10 years ago people will just go and buy, now people do their search well, and this region is tax free, so why Im paying 70k dhs or 20k dollars more for the Land Cruiser here compared to the US which already imposes taxes? so the dealer pays tax in the US and sells it for 70000 dhs less and still make profit, so you can imagine how much profit the dealer is making here, when they give some offers like paying 30000 or 40000 dhs as downpayment for us or give some short periods service contracts or some free insurance, they are still making huge profits
Mosa
That was bang-on!! Well explained.
Sohi
But i guess the car made for gcc have different parts to survive the intense heat while for usa must be different parts thats why gcc spec cars are expensive thats what i guess i am not sure.
samer
In fact in the USA the safety features are more, for example, even if the car has manual transmission and manual windows, it has 6 airbags, while here you find the same car, fully loaded with sunroof and leather and other things but has only 2 airbags ….
Prado
nope… US market is competitive.
Werner Schott
Hi Sohi, I don’t think the GCC models have so many different parts compared to the american specs. Consider that in the USA there are states where the temperature reaches 50 degree and more during the summer. On the contrary, the american models are normally fully loaded and still cheaper than here without tax.
khawar
in my opinion who ppl who are comparing prices with US and gulf is additional freight, insurance duties and high costs, plus US is more of competitive market, but if you are observing prices has gone down here in this market also, but market is shifting where metal carries not big margins but big portion is with after sales.
Lionel
All well learned automotive professionals will know the NHTSA is way more fully comprehensive than GSO when it comes to vehicle-related regulations.
It is true, American imported cars especially the California state regulated vehicles are more suited to the GCC climate.
I would prefer an American spec vehicle to the current GCC spec offerings for a similar price, simply because it is much better spec’d.
WARRANTY is the magic word dealers used often to keep customers.
The only down side is the imports of salvaged vehicles…
So, If you are an American moving to GCC and love your car, bring and use it here. Have known several people who did so.
Ammar
I’m hopping for the best after this decline, The profit dealers make is ridiculously high !
And me as a consumer I’m not welling to pay that much for a car that I can buy for way less when imported from the US. Moreover when people talk about the specs and how it differs, keep in mind that in taxes they do have a similar weather to ours here in the GCC, Don’t take my word for that but I feel the “GCC specs” term might be a scam or some minimal add-ons that they use to justify their prices