Major car makers will look to the UAE and Saudi Arabia for assembly plants after next year, according to a study by the Qatar-based Gulf Organization for Industrial Consulting (GOIC). There is strong demand for cars in the GCC with about 969,000 vehicles imported into the region last year, presenting car companies with a prime opportunity, said Paran Panicker, a consultant with GOIC, which was founded in 1976 as a research and study centre. "If you want to go away from the oil-based economy, automotive is an area to look at," Mr Panicker said. He said that Saudi Arabia and the UAE could be the most lucrative markets, as they took 36 per cent and 28 per cent of the region's total car imports respectively. The report, Automotive Industry in the GCC, will be released in about two weeks. Kuwait and Oman each have 13 per cent of the GCC's car imports, while Qatar represents 7 per cent and Bahrain 2 per cent. Mr Panicker forecast the GCC's car imports to grow to 1.17 million next year, and 1.9 million by 2015. Car makers would consider making the move after the economic crisis settled and if oil prices climbed steadily, he said. "This is the wrong time to talk to anyone, because the car industry is in turmoil," Mr Panicker said. "Longer term, some will put plants there, that is for sure. After 2010, people will start looking at it." Car sales in the Emirates have slowed since the end of last year as banks adopted stricter criteria for car loan approvals, which included higher salary requirements, interest rates and downpayment minimums. Still, Frank Bernthaler, the regional director of sales and marketing for Mercedes-Benz, said even if worldwide economic conditions improved there was no business case for an assembly plant in the GCC. Mr Bernthaler said import duties in the UAE, for example, were among the lowest in the world at 5 per cent, and there were no suppliers or stable workforce for an assembly plant. "Whatever angle you look at it in the current structure, it doesn't make sense," he said. Egypt and Iran were the region's biggest car makers because of their higher import tariffs, Mr Bernthaler said. Jose Paul, a consulting manager at Frost and Sullivan, said in a report last month he expected regional car production to outpace Europe and North America, at an annual growth rate of 3.7 per cent. "The country to watch for in the future will be Saudi Arabia," Mr Paul said. "The development of a specific automotive cluster and research centres have helped in gaining significant attention from global vehicle manufacturers." The UAE has at least one small-scale vehicle maker, the Abu Dhabi-based Gulf Automobile Corp, which assembles pick-up trucks. It had been looking to build an assembly plant in Dammam, Saudi Arabia last year. But Mr Bernthaler said that, worldwide, there was already a 30 per cent to 40 per cent overcapacity at car plants. "The market will not recover to 2008 levels, if you ask me, in the next five years, 10 years, if ever we get back there," he said. Mr Panicker said a car plant in the GCC would be about more than the bottom line and would need government support. "The benefit will be more for the local government," he said. "It will be source of employment and will help to develop the ancillary industry. It is a long chain of advantages." aligaya@thenational.ae
Car makers eye Gulf opportunities
Saudi Arabia and the UAE are untapped markets for new car assembly plants, according to a recent study.
Most popular today
