Car retailers have a lot riding on Ramadan sales spike amid tough year

The usual car buying bonanza spurred by Ramadan deals may not be enough for car retailers to avoid what is forecast to be another tough year.

Dealerships typically rely on the holy month to move inventory, with sales historically jumping by up to 25 per cent during the period.

“Ramadan is a hugely important month for car dealers,” said Karl Hamer, the chief executive of Adamas Consultants. “Ramadan is a traditionally strong month and while there has been lots of pressure, people will still look to buy then.”

The softer trajectory of sales has been part of a two-year story and there may be little margin available to play with this Ramadan.

Many dealerships have promoted longer warranties, free insurance or interest free financing in the past but with these “invisible” aides to sales already on the table, offers may fail to entice enough customers.

“Cheapest does not necessarily mean the best so those dealers that can offer the best package will still do well,” said Mr Hamer.

However, retailers are optimistic about the effect the holy month will have on sales.

“We expect the special Ramadan promotion will improve the Mitsubishi market share by 10 per cent,” said Ahmed Al Habtoor, the chief executive of Al Habtoor Motors, which is offering its stalwart Mitsubishi Pajero model with 0 per cent financing, free insurance, free service and free window tinting.

“Although it hasn’t been an easy year, Al-Futtaim Motors has witnessed an exceptional market share growth,” said a spokesperson for the Toyota dealership. “With this year’s Ramadan offer, we expect for our sales to grow even further.”

Al Futtaim’s Ramadan offers include deferred payments for up to 12 months on select vehicles.

However, with new car sales down about 30 per cent compared to last year, the sector has been hit by layoffs at dealerships and some may be forced to close locations.

“Many dealers are looking to Ramadan to get rid of the backlog of stock from last year, but it’s not going to happen,” said Bill Carter, the chief systems and innovation officer at Autodata Middle East.

The outlook beyond Ramadan is also uncertain for car retailers with meaningful growth only returning in 2019, he said.

“This year will be as bad as last year and next year will still not be any better. We see 5 per cent positive growth for the market in 2019.”

Andrew Savvas, the brand director for Volkswagen Middle East, said that it has continued to be a challenging year for VW, just like 2016.

“We have confidence that we will sustain our sales with a lift in the second half of 2017 and 2018,” he said.

In addition to discounts this Ramadan, VW is running a philanthropic initiative, #MilesforMeals, converting test drives into meals for the most vulnerable members of society.

On its Golf, Jetta, Passat, CC, Beetle and Touareg models, VW is offering free service for three years, free registration, six years warranty with unlimited mileage and discounted offers.