Al Naboodah aims to double Peugeot market share

Al Naboodah Commercial Group – distributor of Peugeot in the UAE through its subsidiary Swaidan Trading Company – hopes that the recovery in economy, auto finance and consumer confidence will help it double market share in the UAE next year, a senior official said.

Peugeot currently commands a small market share – in low single digits - in the UAE due to limited number of models on offer by the distributor. Al Naboodah has dealership for Peugeot for more than 30 years and represents in Dubai and Northern Emirates. It also has dealership rights of Chinese automotive major Great Wall. It launched the first passenger car from Great Wall earlier this month and plans to expand its model range.

“Since product offering is restrictive, our share is estimated between one to two per cent. I’m hoping to grow between two-and-a-half to three per cent next year as we intend to launch a range of new models with the first two reaching the UAE in the first quarter,” said Madhu Pillai, Group General Manager for Al Naboodah Commercial Group.

“We plan to introduce three to five new models next year - starting with sports coupe Peugeot RCZ and 5008 in the first quarter. The new models are categorized in mid and entry level segments. With regard to Great Wall, we are expecting another two to three new models next year - including possibly an SUV (sport utility vehicle),” Pillai added.

Clear road ahead in 2011

Commenting on sales, Pillai said 2010 was definitely better than the previous year, registering 15 per cent increase in sales with most of it materialising in the second half.

“We were not different from any other company in the market. 2007-08 was boom period, everyone was unable to keep pace with the demand; but when crisis hit at the end of 2008, the automotive market also took a hit, sales slumping 40 per cent in 2009. Fortunately, second half of this year is coming back - but not to the extent of 2007-08 level – with around 10-15 per cent improvement. From our side, we are looking at 2011 to see aggressive growth in two ways - one is that the market will grow and secondly the introduction of new models will take increasing market share. Currently, we have a fairly compressed market portfolio, for example, we don't do four-wheel drive or luxury cars and around 40 per cent of the market is SUV. With the launch of sports coupe in January, we expect our market share will be quite higher at the end of next year - expecting 60-70 per cent growth in sales compared to our competitors next year.”

Inventories cleared

Pillai also revealed that the dealers in the UAE have cleared inventories this year whereas they faced significant problems in 2009 due to heavy orders placed by them for new vehicles prior to the financial crisis.

“From my experience, most of companies have been able to clear their inventories; the year 2009 was a difficult year for the whole industry because when the crisis hit at the end of 2008, the inventories that were built up based on fairly bullish 2009 because in mid-2008, people were looking at growth curve to continue in 2009; so you have normal 2-3 months of inventories plus principles based on your increasing forecast for 2009. So we believe companies were holding between six months to 1-year inventory.

“So 2009 was really spent cleaning the inventory. From our perspective, because we are smaller player, we didn’t have the inventory issue like the other bigger players. We were able to sort out most of inventories by the end of 2009 or probably early 2010. Today, I don’t have a single car of 2009-2010 in stock; all of my stocks are 2011 models,” he added.

Auto financing - still an issue for some sectors

He also revealed that when it comes to auto financing to sectors like construction and real estate, financial institutions are reluctant and believe that those industries are still under risk. “They are quite careful and scrutinise the documents. People working in industries like real estate and construction find it difficult to get bank finance than anyone working in trading company,” he added

According to Pillai outlook for the automotive retail market depends primarily on two factors – consumer confidence and auto finance.

“At the end of the day, automobile investment is the second biggest investment people make in their lives. When you are not sure about your future you will not invest in new car. The second factor is the availability of bank finance. Around 80-85 per cent of our sales are through finance so when bank financing was tightened up in early part of 2009 and in 2010, it certainly reduced our ability to service the demand. On the one hand demand was shrinking and, on the other side, bank finance was also shrinking. But luckily in the second half of 2010, both these primary factors are coming back. Consumer confidence is coming back which is reflected in general retail market and, similarly, automotive finance is getting back on track,” he said, adding that now there is a lot of flexibility on finance side.

“What has changed is that banks are much more sensible in lending terms. In the past, banks offered 0 per cent down payment to buy new cars and were falling over to get the business. But today, they are much more selective and understand that lending 100 per cent of car’s value is not the best thing to do,” Pillai concluded

Follow Emirates 24|7 on Google News.