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26 May 2024

Increasing vehicle inventory hits dealers

New vehicles at a storage yard in Jebel Ali. (CRAIG SCARR)

By VM Sathish

Automobile dealers are looking for buyers for thousands of vehicles that are getting piled up at ports, warehouses and showrooms following a drop in sales in the country.

They are on the lookout for cheaper parking space for new and used cars. Some have created huge open areas with 24-hour security and others are in the process of doing so, industry sources told Emirates Business.

"Imported vehicles are supposed to be cleared from ports within five days of arrival and if they are not moved within the next seven days the importer has to pay demurrage charges," said a logistics company source.

"Keeping vehicles at the port results in huge daily demurrage and congestion charges. Automobile sales teams have been instructed to sell vehicles with steep discounts to avoid paying the port charges."

Discounts of as much as Dh36,000 are being offered on some four-wheel drives and Dh5,000 to Dh23,000 on saloon cars. Dealers had placed huge import orders based on high demand forecasts and growth projections made before the economic crisis. They have been caught off guard by the sudden fall in vehicle sales.

Some have already paid huge amounts in demurrage charges because their warehouses are full and they have no option other than keeping vehicles at the port.

Dealers have created parking areas for unsold new vehicles in Dubai's Al Quoz industrial area, Sharjah and other northern emirates.

"We have set up an open area for unsold vehicles that are brought from showrooms," said a security guard at a site. "More than 1,000 cars can be parked here and currently 850 from a leading US company are kept here."

There is 24-hour security at the fenced-in facility. Emirates Business visited a number of similar facilities. A source at an Oman-based dealer that imports Japanese cars from the Sultanate to the UAE said: "Sales in Oman and the UAE have fallen sharply and our warehouses in Muscat stocks 40,000 unsold vehicles.

"People are leaving the country… so service centres are also not getting enough work. This month's car sales are next month's service business. As new car sales are down we are not expecting the same number of cars to come in for servicing.

"Demand for spare parts and after-sales service is falling and we are terminating employees who have completed 20 years' service with the group."

A source at Nissan Middle East said: "There has been a serious drop in car sales across the Gulf and the severity of the problem varies from dealer to dealer and manufacturer to manufacturer. But banks are still financing car sales and there are cash purchases too."

Some dealers that never ran special offers previously are now doing so. One salesman said: "Sales of saloon cars have dropped drastically and we have reduced the price of a 1.3-litre model from Dh46,000 to Dh41,000. We are also giving free insurance and other offers. Customers are waiting to see if prices will fall further."

Arrivals of ro-ro ships have dropped substantially, according to a logistics company official. He said: "After the closure of Port Rashid there was congestion at Jebel Ali Port. If a container is not cleared within five days the customer has to pay Dh80 per container per day for the next seven days and is also charged for the first five days.

A senior official at a premium car dealer said: "Sales have dropped mainly at the lower end of the market. Premium cars like ours have not been affected much by the banks' credit restrictions.

"There is a problem with slow-moving vehicle inventory and firms are having to pay demurrage charges that run into millions of dirhams."

However, a Saudi retail expert said: "The economic crisis and the fall in the oil price have affected the sale of luxury products, especially automobiles. Customers are delying decisions to buy vehicles as they expect further drop in prices."

General Motors is offering discounts ranging from $500 (Dh1,836) to $1,000 on Hummer, Chevrolet and Cadillac models to members of the American Business Council in the UAE. Members can approach dealers in the UAE that sells the brands and claim the discounts.