Local used-car market to feel the heat of recalls

The recall of millions of Toyota and Honda cars in the US and Europe is expected to impact the local used-car market where prices are likely to fall with parallel importers looking out for bargain deals for used faulty cars from Western markets.

Speaking to Emirates Business, a cross section of used-car dealers said the parallel import of used cars from the US could bring some of the affected models to the UAE and Saudi Arabian markets where Toyota vehicles imported from the US are in good demand. Traders also procure cars from Japanese used-car dealers.

Sources say importing the faulty vehicles from the US would not pose a legal problem as the current restriction in the UAE is for old vehicles from a cutoff date, not brands.

Al Futtaim Motors, the official Toyota dealer in the UAE, said last week the recall will not have any impact in the local market and the resale values of Toyota vehicles will continue to remain high. However, local auction houses and cash-for-car dealers are already seeing the prices of affected models, like Honda's Accord and Civic, coming down.

Assad Al Thaher, CEO, Discount Rent a Car, sister company of MAC Commercial Brokers that import premium cars from Europe, said: "Used-car importers in the UAE are sourcing four-wheel-drive vehicles mainly from the US market where prices have fallen by 25 to 30 per cent due to the recession. The recall of eight million Toyota vehicles in Europe and the US will further depress used car prices here.

A large number of the recalled cars are likely to come to the UAE market through used-car importers.

"Earlier, any four-wheel-drive vehicle imported from the US could be sold here for a profit, but now consumers are choosy about quality as the number of manufacturers in the market has gone up."

Anwar Ali, a used-car dealer, said importing salvaged vehicles from the US was the cheapest option for many traders, but after local car prices fell, buying used-cars from local customers became a better option than importing from the US.

"Top-sellers in the UAE have been Toyotas made to American specifications imported from the US. A number of used-car dealers in the UAE import defective, zero mileage and salvaged cars from the US. Popular models, such as RAV 4 and Land Cruiser, and some recall-affected models are likely to come to the UAE from the US market," Ali said.

"Earlier, it was easy to make a profit of Dh10,000 by importing a 2007 model Toyota Camry with an accident history, repairing it for Dh36,000 and selling it for Dh45,000. Of late, prices of used cars in the UAE market have come down and the price difference between importing an old Camry from US and procuring one from local customers has declined," he added.

"With the recall of millions of vehicles in the US, there is a possibility that prices in the US market for the affected models will fall further. Prices of used Toyota cars in the local market have been falling and further import of cheaper Toyotas from the US can further depress the market."

Anwar has halted his used car business for the time being to monitor the new market situation.

Abdul Rahman, owner of Al Ithihad Car Auction, Dubai, said prices of the affected models were coming down as there were not many takers for models such as Avalon and Sequoia.

"I have sold an imported Toyota Avalon 2006 model for just Dh45,000 compared to Dh55,000 that the car fetched earlier. The price of recalled Honda models is also declining and the number of takers for the affected models at local auctions is less." Rahman said he was selling around 75 cars in weekly auctions. A Honda Accord 2002 model was auctioned recently for just Dh12,000, he said, which is a very low price. He said a number of Saudi car buyers come to the UAE market to buy imported American cars.

TV Krishnan, Director, Green Valley Used Cars, in Dubai's Al Aweer, said the price of recalled Toyota models in US market could come down due to negative media reports, but the impact on the local market would not be much as the recall issue was affecting mainly the Toyota company and not auto traders or dealers.

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