In conversation with Director of Internal Audits, at one of the biggest Automotive Company in UAE, we have attempted to identify the trends, pricing, and challenges in UAE Used Car Market.
Q1: How has the COVID-19 pandemic impacted the Used Car Market, and what trends have emerged since in UAE?
The pandemic caused a significant downturn in the market during 2020 and 2021. However, the market has been gradually picking up since the previous year. Dealerships, like many other sectors, experienced a drop in business during the pandemic, but we're observed a gradual increase after that.
Q2: Can you shed light on how the shortage of microchips has impacted the UAE Used Car Market, particularly in terms of price changes?
The shortage of new cars has had a significant impact. Prices have increased by around 30-40%, and the same percentage increase has been observed in the circulation of used cars. The scarcity of these essential components has hampered new car production, leading to higher demand for used cars and subsequent price hikes.
Q3: When it comes to used cars, how significant is the influence of imported vehicles versus those sourced locally?
Around 70% of used cars in the market are from the local market, while the remaining 30% are imports. Notably, Japanese and American cars.
Q4: When it comes to imported vehicles in the UAE's used car market, which brands hold a substantial share in this category?
Brands such as Toyota, Lexus, Mitsubishi, Honda, and Nissan are the top players in the imported used car segment. These brands command a significant share due to their popularity and reputation among consumers in the UAE. Japanese brands make up to 60-70% of the market.
Q5: Switching gears, could you shed light on the depreciation rates for different types of vehicles, particularly those from Japan and the USA?
Japanese cars typically experience a 5-10% depreciation rate, contingent on mileage and overall condition. On the other hand, German cars tend to lose value at a faster rate, approximately 10-20% per year.
Q6: Could you provide some insight into the factors driving the higher depreciation rates for German vehicles?
German vehicles, while renowned for their engineering, tend to experience higher depreciation due to factors like their higher initial prices and the perception of being less economical to maintain. These factors contribute to a faster loss of value over time.
Q7: How is the UAE Used Car Market structured in terms of organized and unorganized sectors?
The used car market is divided into organized and unorganized sectors, with a split of 60% organized and 40% unorganized. Within organized multi-brand dealers account for around 30%, while OEM sales contribute around 10%. Online marketplace makes up the remaining 60%.
Q8: Can you elaborate more within the unorganized sector as well, what is the split of local dealers and C2C sales, and please mention other major components if there are any.
For the unorganized market corporate and company sales contribute around 25%, word of mouth around 15% individual dealers makes up the remaining 60%.
Q9: Can you provide insights into the key players and dominant dealerships in the UAE's Used Car Market?
Prominent dealerships include Al-Futtaim and Arabian Automobiles. These players hold substantial influence, with Al-Futtaim being a dominant force. The Used to New car ratio has shifted from 2 before COVID to around 4 at present, and it's expected to gradually decline to 2 within the next 2-3 years.
Q10: What's the overall range of used car prices in the UAE Used Car Market and what are your thoughts about the future trend of used car prices?
The average price range of used cars in the market currently falls between 80,000 to 100,000 AED. However, recent market dynamics, compounded by the shortage of new cars caused by microchip issues, have led to a notable increase in prices. As a result of these factors, we anticipate that this trend of higher pricing and circulation will persist for the next few years, shaping the market in a way that sees prices and demand for used cars remain higher than usual for the next three years and then decline.
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