DUBAI: Buyers of new cars in the UAE will have reason to be relieved – new models won’t be priced as high as they are when they are launched in 2021 and 2022, according to senior officials at major dealerships.
If there’s an uptick this year, it’s mostly in luxury models (and buyers of those models aren’t the type to worry about sticker prices).
Michel Ayat, head of Dubai Car Dealers Group and CEO of Arabian Automobiles, local Nissan, Infiniti and Renault dealerships, said: “From what we’ve seen so far with popular 2023 model year models, we Didn’t see a price increase.” .
After seeing price increases of 10% to 30% (depending on the model you choose), new car buyers in the UAE will try to keep prices as stable as possible. (Together with extended warranties, free insurance, and every other incentive a dealer can throw in.)
Car financing is where costs have skyrocketed. All of this matters amid signs that consumers in the UAE are becoming more cautious about their spending. The Federal Reserve’s streak of rate hikes — and matching them locally — has led to a sharp rise in the cost of auto financing for buyers. Dealers compensate by extending warranties where possible or in terms of insurance.
Reasons for maintaining prices
The reality is that transportation costs have dropped significantly compared to 2021 and the first half of 2022, which will play an important role in ensuring that showroom prices remain manageable in 2023. Whether from the Far East, Europe or elsewhere, shipments are regular and cost less to the dealer.
This is passing.
The second reason, according to traders, is the strength of the dollar (and thus the dirham) against major currencies for most of 2022. “The strength of the dollar has helped us reduce transportation costs by 5-10% in the third and fourth quarters of 2022 and is still there now,” said an official at a dealership in Abu Dhabi. “If new car buyers compare last year’s prices to today’s prices, they’ll see they’re getting a dollar boost.”
Car dealers and manufacturers are also confident that another issue for 2021-22 will be resolved later this year – with new cars immediately available to buyers. “By the second half of 2023 at the latest, buyers can drive away with their new cars within one, two or three weeks of placing an order,” Ayat said. “Automakers are confident that semiconductor chips will be readily available and there will be no production lags.
“When that happens, dealers can commit to immediate shipments to buyers and have enough of the popular models in stock.”
A shortage of semiconductors — widely needed in today’s feature-laden car models — means new buyers can get their cars after waiting months for the past two years. (The case remains for premium and luxury cars.)
Price hikes – not a problem for UAE car sales
Even with higher prices, the UAE car market is doing quite well in 2021-22. It was one of the first consumer categories to show strong growth following the Covid disruptions of 2020. As with most consumer trends in the UAE, the premium car segment will recover first in 2021, followed by a recovery in demand across all categories soon after. SUVs outsold sedans for the first time during this period.
All with the added cost of buying a new car — and owners having to wait longer for their options to be delivered.
“We estimate new car sales in the UAE to reach 191,000 in 2021 and then 211,000 last year,” Ayat said. “We expect a similar increase in 2023, which should mean 235,000 vehicle sales. That would be good.”