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29 March 2024

UAE car dealers race to clear inventory with attractive deals

(AFP)

Published
By VM Sathish

The global vehicle market is flooded with unsold cars and leading manufacturers and their dealers in the UAE are launching a range of eye-catching offers and promotions to shift old-model stock.

Hyundai is offering a 20 per cent discount on a selection of models, a 2009 model Nissan Tiida can be bought for just Dh30 a day over a 72-month repayment period and eager buyers have been snapping up sports versions of the Toyota Camry for just Dh64,999.

In normal times carmakers would by now be launching their 2010 models.

The first Asian financial crisis sounded the death knell for many South Korean companies but the current financial crisis appears to be a boon to the country's carmakers, the latest challengers to the Japanese and US manufacturers.

Auto companies such as Hyundai, South Korea's largest, enjoy a special advantage in the current volatile market. The country's currency, the won, has depreciated heavily, making its products more competitive on world markets.

Meanwhile, the market leaders – mainly Japanese companies – are reporting record losses as sales plummet around the world. The main problem affecting the competitiveness of Japanese cars is the ever-stronger yen. Japanese companies with production plants in their home country and the US are incurring huge losses due to the currency's appreciation. It costs a South Korean manufacturer 10 to 15 per cent less than its Japanese rivals to produce a car in its home country and ship it to overseas markets such as the US and the Middle East.

Juma Al Majid Establishment, Hyundai's dealer in the UAE, launched the 20 per cent discount offer on August 1 and plans to continue the promotion until Saturday. The Hyundai Veracruz, which previously cost Dh123,000, is now available for Dh99,000 – a reduction of Dh23,100.

"The Azera passenger car, which was Dh104,000, is available at Dh89,900 and the Santa Fe, a family four-wheel-drive, is on offer at Dh79,900 compared with Dh98,000 before," said a Hyundai official in the UAE.

Hyundai, which has sold a million cars in the Middle East, is offering six-year finance deals and other benefits as part of the group's aggressive marketing campaign in the UAE market. All the cut-price models are full-option versions equipped with the latest safety features and electronic gadgets such as high-tech navigation systems, rear cameras and sensors for parking, driver memory and multiple airbags.

"It is the best offer in the market and we have only limited stock," added the official. "We have many cash customers who are buying these cars without relying on bank finance. "During one day I received 50 serious enquiries from good customers, which is unique in these market conditions."

Hyundai last month announced record first-half profits, and its net earnings jumped by 48 per cent year-on-year to $650 million (Dh2.39bn) in the second quarter.

Its profit – equal to 10 per cent of revenue – was 3.6 times the amount achieved in the previous three months and double the amount most auto analysts had predicted.

This strong performance contrasted with the huge losses incurred by major Japanese carmakers such as Toyota, Nissan, Honda, Mazda and Mitsubishi.

However, analysts said that if the South Korean currency had not depreciated heavily Hyundai would have also incurred huge losses in the first half. The won depreciated by about nine per cent against the dollar in the second quarter and is 25 per cent weaker than it was at the beginning of 2008.

The currency has weakened from an exchange rate of 924 won to the US dollar in 2007 to 1,274 to the dollar in 2009. In contrast the dollar-yen exchange rate has appreciated from 124 yen to the dollar in 2007 to 96 yen to the dollar in 2009. These figures explain why South Korean companies can offer such huge discounts which the Japanese dealers cannot match.

Another factor that has helped Hyundai – which aims to sell three million cars globally this year – is its strong sales performance in the giant emerging markets of China and India.

A further attraction for purchasers of vehicles from Hyundai and Kia – South Korea's second largest carmaker – in their home market is the offer of free redundancy insurance to those buying through instalment schemes. If a Kia or Hyundai owner in South Korea loses his or her job due to the economic crisis the company will pay him or her three million won (Dh9,000).

In the UAE, Japanese car companies and their local dealers are hard pressed by the promotions offered by the South Korean brands and US auto companies.

An official at Japan's Nissan said: "We have started seeing signs of stability and economic recovery in the GCC market. Due to the movement of yen, Japanese carmakers are not in a position to reduce prices to match the schemes offered by South Korean companies.

"Japanese companies are now mainly offering new car buyers additional freebies, gadgets and high-tech features such as Bluetooth.

Arabian Automobiles, the flagship company of the AW Rostamani Group and sole dealer for Nissan, Infiniti and Renault in Dubai and the Northern Emirates, has announced a new finance plan targeting budget-conscious drivers. Customers can buy the latest 2009 model year Tiida for just Dh30 per day over a new extended repayment term of 72 months.

Finance can be arranged with a zero per cent down payment and 4.25 per cent interest or profit rate.

Arabian Automobiles CEO Michel Ayat said: "The local car market is extremely competitive and consumers have the opportunity to take advantage of attractive pricing complemented by a host of added-value incentives. This is a great time to buy a new car.

"The Tiida has been an extremely strong seller in Dubai since we first introduced the model in 2005. With these new extended repayment terms potential customers can confidently include a new Tiida in the family budget at a very low cost."

The Tiida has become Nissan's best-selling car globally, passing the one million sales mark in March 2008.

Arabian Automobiles is also attracting buyers with a summer price offer for a limited period featuring the Tiida sedan at Dh44,950 and Nissan Altima at Dh63,950.

Another source at a Japanese company said: "If Japanese companies reduced their car prices to increase sales, as the South Koreans and Americans are doing, they would destroy the brand. We cannot afford to destroy our brand image by slashing prices temporarily."

This conservative policy helps existing owners of Japanese cars in the region by maintaining long-term confidence in the brand and resale values – major factors that can influence customers when they consider which type of car to buy.

"The Japanese yen has been going through the roof," added the source. "Local car dealers have already lost heavily due to the currency exchange rate movement."

However, Al Futtaim Motors, the official Toyota and Lexus dealer in the UAE, is offering some special deals.

The promotion includes limited editions of the Corolla Sport with Bluetooth, rear parking sensors and window tinting for Dh49,999. The Yaris Sport with similar specifications is available for Dh39,999, while the Camry Sport is on offer for Dh64,999.

One customer who wished to buy a car as soon as he passed his driving test said: "The special offer for the Toyota Camry was a bargain but when I reached the showroom stocks had run out."

Mitsubishi dealer Al Habtoor Motors is running an offer with Emirates NBD bank that will end on Friday.

"The special offer gives good discounts," said a salesman. "This is the best offer in the market and we are doing better than all the other car dealers in the UAE."

The offer comes with free two-year insurance on selected models, financing options, free roadside assistance, a free credit card and a Salik card from Emirates NBD.

The Platinum Offer covers the Pajero (starting price Dh85,800), Lancer EX (Dh54,284), Galant (Dh53,420) and Lancer (Dh39,500) models. Repayments start 90 days after the purchase date.

And further attractive deals may soon be available as dealers are currently finalising their Ramadan offers.

Small is the new big

Hyundai's success in the global market is partly due to the growing demand for small fuel-efficient cars.

Prices of budget cars around the world are expected to come down drastically following the introduction of India's Nano, a Rs100,000 (Dh7,700) car that is the cheapest in the world, and the Dacia Logan, a budget model launched in Europe by Renault after the French company took over the Romanian manufacturer.

The introduction of the Nano by Tata Motors is creating ripples around the world as leading European and global car manufacturers try to introduce cheaper versions of small cars.

In the light of the current preference for compact, efficient cars, Hyundai is increasing the production capacity at its Chennai plant by 20 per cent. The impact of the Nano will be felt in the Middle East market, too, as global companies are keenly following developments in Asia.

Other global firms are trying to copy the budget models and the competition will see prices fall further.

While the Nano is sold only in the Indian market and does not meet European standards, the Romanian brand has been launched across Europe and is doing extremely well. The Logan costs just €5,000 (Dh26,000) and is already unsettling rivals in the European car market.

While most European car manufacturers have recorded steep falls in demand due to the global recession, the Dacia has recorded booming sales as recession-hit middle class customers opt for the budget car.

Dacia was acquired by Renault in 1999 and the Logan was originally meant for the Romanian market only, but it is selling like hot cakes in Europe – especially in Gemrany and France. Tata has long-term plans to launch the Nano in Europe in 2010-11 and in the US three years later.

"The Nano is currently sold only in India but it is setting the industry standard," Karl Beckers, Managing Director of German spare parts maker BBT Automotive Components, told Emirates Business.

"While recent attempts to introduce budget cars by German and Turkish companies did not succeed, the introduction of the Dacia Logan has attracted a lot of new customers.

"While the sale of most European car companies have come down drastically, Dacia has made remarkable progress. Worldwide the prices of budget cars are bound to fall further.

Dacia recently announced plans to increase production, starting in June, from 1,200 to 1,340 units a day due to high demand in export markets.

The number of new Dacia cars registered in the European Union and the EFTA states over the first four months of the year rose by six per cent to 65,122 units in a market that saw a 15.9 per cent decline, according to information from the European Automobile Manufacturers Association. (VM Sathish)

 

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