Car sales move up a gear

Middle East units of car makers post surging profits on the back of easier availabilty of finance.

After putting off purchases during the financial crisis, people are again buying car as financing becomes more readily available.
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Car sales are accelerating across the Emirates as buyers tap into easier financing.

Sales are also on the rise in the wider region despite unrest in many countries, with General Motors (GM), Ford and BMW all posting robust figures for the first quarter yesterday.

"People put off buying things during the financial crisis when liquidity was tight," said John Stadwick, the president and managing director of GM Middle East. "In 2009, rejection rates for finance were up at 35 to 40 per cent. Now these are near 20 per cent."

GM, which offers the Chevrolet, Cadillac and GMC brands, had an increase of 40 per cent for sales to individuals in the quarter, compared with the same period last year.

Overall sales to motorists and fleet leasing companies grew by 16 per cent to 29,870 vehicles. "We've had a solid start to the first quarter of 2011 despite unrest in the region and the tragic disasters in Japan," Mr Stadwick said.

GM experienced such strong demand that it did not have enough cars in stock to keep up with sales. Deals with some leasing companies had to be deferred until the second half of the year.

Ford experienced a similarly strong quarter, with a 52 per cent increase in sales across the GCC, compared with the same period last year.

The highest performing market for the region was Saudi Arabia, with Ford and Lincoln sales increasing 75 per cent over the same quarter last year.

"The retail financing is better, that's why we have an increase," said Hussein Murad, the director of sales for Ford Middle East. BMW, meanwhile, delivered 4,635 vehicles to customers across 14 Middle East markets - a 19 per cent growth rate.

Abu Dhabi was the highest volume market with sales increasing 42 per cent, while Dubai was close behind with 38 per cent growth.

Manufacturers' sales growth far outstripped overall GDP growth for the Middle East and North Africa region, which is predicted to grow at 5 per cent this year, the IMF says.

Financing for cars also seems to outpace overall bank lending, which grew at just 3.1 per cent in February compared with the same month last year, while personal loans were up 5 per cent.

After two years of financial uncertainty, Mr Murad said consumers across the region were pursuing "value for money" above all else.

"Customers want the car to have everything - value, safety and the latest technology," he said. "People are researching more and more and being savvy in their buying."

Ford introduced a series of models to the region in the final quarter of last year, including the Edge, Mustang, Taurus and Fusion.

GM also made a strategic move, offering a wider price range, with its smaller vehicles performing strongly along with larger pick-ups.

"We are trying not to just focus on price but the whole cost of ownership of the vehicle, including maintenance costs and residual value," Mr Stadwick said.

All three car makers also attributed growth to a high level of investment by car dealers in showrooms and after-sales service.

"A number of sizeable investments made in facilities and customer service across the region helped contribute to strengthen the company's performance," said Reiner Braun, the director of sales and marketing for BMW Group Middle East .

GM and Ford said their partners in the region, particularly in the UAE, were spending hundreds of millions of dirhams on sales infrastructure, opening new forecourts and workshops.

Government spending across the region, such as Saudi Arabia's recent package, has also buoyed the car market, said industry executives.

"Any time a government invests that kind of money, it trickles down and finds its way into the marketplace and is good for the auto industry," Mr Stadwick said.