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28 March 2024

Car dealers against cutting prices

The way forward is to enhance the attractiveness of the product to the customer says Wassim Derbi, Marketing Manager, Gargash Enterprises. (EB FILE) 

Published
By Bilal Mohammed

Most car dealerships in the UAE have decided against cutting prices in response to the financial slowdown, but many are launching special offers to attract buyers.

"The prices of Mercedes-Benz cars will remain unchanged though customers will find we are offering more deals such as extended warranties, service agreements and free insurance," said Wassim Derbi, Marketing Manager of distributor Gargash Enterprises.

"This way the advantage to customers is increased during this period. Customers in the region recognise they already get a good deal on a German car, which is why prices for Mercedes-Benz vehicles have not fallen here. The cars are still relatively affordable compared with the European market, where a considerable amount of tax has to be paid on vehicles.

"Demand for Mercedes-Benz vehicles has not fallen. There are still drivers in the UAE who want to buy a Mercedes-Benz because it is one of the top luxury German brands. And demand increased during the first quarter for approved used cars.

"Regarding sales figures, Gargash Enterprises achieved another record in 2008 with 4,800 cars sold across Dubai, Sharjah and the Northern Emirates, while 4,250 were sold in 2007, around 11 per cent increase in sales volume.

"In Q4 2008, there was a slight drop of five per cent compared to Q4 2007. The main reason behind the drop was the economic crisis and the number of holidays in December, where showrooms were operational for 14 days only.

Derbi said Gargash's showrooms were offering a number of promotions for new and used cars and would continue to do so until the end of the second quarter.

"The offers are mainly focused on value-added packages. The way forward is to enhance the attractiveness of the product to the customer as now is the best time to buy a new or approved used Mercedes-Benz.

"For the GCC and Middle East, Mercedes-Benz achieved a market share of 45 per cent in Q1 2009 compared to 46 per cent in Q1 2008. This market share is only towards BMW and Aud (luxury car market).

"Gargash Enterprises is not affected by exchange rates as it prices Mercedes-Benz cars in local currency. This allows distributors to plan ahead with pricing policies as they are not affected by constant price changes.

Hugh Dickerson, Sales and Marketing General Manager at Toyota distributor Al Futtaim Motors, said: "We have not reduced nor increased, the prices of our vehicles during this crisis. We have, however, improved the offers on our vehicles to ensure that we provide the best possible value for our customers.

"We have a very attractive range of offers on both the Toyota and Lexus ranges that make our cars very affordable. It is important to note that our costs have in fact greatly increased as the Japanese yen is so strong, but we have not passed these increases on to our customers.

"Of course, like all manufacturers we have been affected by the economic difficulties in recent months. While consumer demand has dipped due to a lack of confidence, the real issue has been the lack of financing for vehicle purchases in both the retail and corporate sectors.

"However Al Futtaim Motors has a very close working relationship with its banking partners. As a result the provision of funding for a Toyota is perhaps more easily available than with some other brands."

Al Futtaim is offering buyers a year's free insurance, two years' free servicing and a free three-year warranty. Lexus customers receive a year's free insurance and three years' free servicing.

"Under a new offer financing is available to those with salaries of Dh4,000 – the current minimum levels in the market are typically Dh8,000 to 10,000. The interest rate is a low 5.5 per cent and we are not asking for a deposit – typically banks are asking for a down-payment of between 10 and 40 per cent. "We are confident this offer will stimulate the large part of the market where customers are still keen to purchase a new vehicle but have, until now, not been able to obtain bank funding.

"While we do not disclose sales figures I can confirm that, unsurprisingly, our overall sales were down in Q1 2009 compared with Q1 2008 as the market contracted. We have, however, seen our sales improve during the first quarter and our March 2009 sales were 47 per cent up on January."

He said sales in March had been boosted by special offers as well as the launch of the new Toyota Sequoia and Lexus RX350 SUV.

"These launches and the new models that are scheduled for the rest of 2009 are a clear demonstration of the strong level of support we are getting from Toyota, which has continued its high level of investment in product development despite the global economic downturn.

"We at Al Futtaim Motors are lucky to be partnered with probably the strongest car company in the world. Toyota has been very supportive during the crisis and most importantly has not cut back its research and development plans.

"Regarding the market share in 2007, Toyota held 33 per cent of the UAE market and Lexus 16 per cent. In 2008, Toyota had 32 per cent share and Lexus 18 per cent.

Ayman Al Bijawi, Chevrolet Sales Manager at Bin Hamoodah Auto, said: "The prices of our cars will not change, price cuts are not being discussed. But we will announce promotional offers. Each season will have new offers – summer, the back to school period, Ramadan and the year-end.

"Our Q1 2009 Chevrolet sales were very close to the levels of Q1 2008 because our cars are competitively priced and our clients belong to the medium and high sectors, so we have not faced major difficulties.

"The price range for Chevrolet cars is between Dh34,000 and Dh340,000. We have around 20 models including ones suitable for all types of customer. All these factors helped to shield us from the international financial crisis. The impact of the crisis on Chevrolet in Abu Dhabi and Al Ain was limited because demand transferred from some other brands to Chevrolet. Therefore, 2009 will see an increase in Chevrolet's market share. In addition sales to government bodies along with other institutions helped us in Q1 2009."

The company ran a promotional campaign from January 15 to March 15, which included the provision of up to Dh10,000 for customers to use as a down-payment in case the bank demanded one, or to pay for insurance.

"The No More Barriers campaign came at a good time," said Al Bijawi. "We studied the difficulties customers faced and provided solutions for them."

Omar Baddar, Marketing Manager for Hyundai at Juma Al Majid, said: "We are offering good discounts on all our cars, though our prices were always, and still are, very competitive.

"We continue to plan promotions, including discounts and added-value offers, to attract customers in view of the stagnation we are witnessing in the market. Sales have dropped in many sectors as an inevitable result of the financial crisis, and the car sector is not immune to the downturn.

"Our sales dropped by approximately 20 per cent in the first quarter of 2009 compared with same quarter of 2008, which is one of the lowest falls in the industry."

Baddar said the introduction of stricter lending rules by banks was one of the major causes of the fall in sales.

"There are higher interest rates, higher salary requirements and many other difficult conditions," he added. "We are helping customers to obtain loans by establishing a new alliance with a major bank.

"Customers will enjoy the best profit rate in the market, plus zero down-payments and a 90-day grace period before they pay their first installment. Other benefits will include a free credit card and the possibility of finance for Islamic insurance. Regarding exchange rate fluctuations, these are not affecting prices much since most car dealers have enough stock and are importing very little.

"No one can be optimistic about the market situation these days, but if banks and other lending institutions begin to ease the restrictions on car loans we shall see sales pick up.

"Hyundai is going against the trend among many car manufacturers in terms of spending more on research and development and introducing new products, particularly luxury cars."