UAE's passenger car market on path of recovery and robust growth

21 July 2022 7 min. read

Glasgow Research & Consulting has released its latest strategic market study of the UAE passenger car market, shedding insight into the sector state and outlook for the coming years. After unveiling the report’s insights at a recent automotive industry event, partner Vishal Pandey takes the pen to outline some of the study’s key insights.

The government of the United Arab Emirates supports the automotive sector as a key revenue generator. As a result, it is one of the fastest-growing automobile markets in the Middle East region. After Saudi Arabia, UAE holds the second-largest automotive market position in the Gulf Cooperation Council (GCC).

After the 2008 financial crisis, the UAE automotive market gradually began to recover. There was outstanding growth between late 2010 to early 2015. This growth was disrupted in the second half of 2015 as oil revenue declined.

UAE Passenger Car Market Sales in ‘000 units

The market turned for the better in 2019, but soon the Covid-19 pandemic hit the country affecting the sales of new vehicles.

Notably, while the sales of new cars dropped by almost 50%, the market for used and pre-owned cars saw a rise in sales. With the air of uncertainty in the economic sector, earnings dipped and consumers preferred to buy second-hand cars. Many auto manufacturing companies were forced to halt the production of new cars, resulting in a surge in used car sales in the market.

The period after the pandemic saw a quick rise in the sales of new cars. In fact, at present, the UAE vehicles market is unable to meet the sudden demand surge. For most high-end cars, there is currently a six to twelve months waiting period.

Market share of UAE OEM in 2021

What brands are driving ahead?

With this rise in the purchase of new vehicles, Japanese automobile brands continue to thrive in UAE. According to a report by Dubai Customs, Japan is the UAE’s top automobile trading partner. Toyota, one of the largest automobile manufacturers in the world has a market share of 30.9% in UAE.

Japanese brands – traditionally regarded as more dependable than their European and American counterparts – are the country’s best sellers. Toyota is a consistent market leader since 2015, with models like Hilux, Land Cruiser 200, Prado, Corolla, Yaris, and Camry driving sales. Nissan and Mitsubishi rank second and third respectively.

So what explains the popularity of Japanese brands? Japanese brands have great resale value, and with the increase in purchase of used vehicles, more people are choosing Japanese brands. In addition, Japanese brands have relatively easy availability of spare parts at cheap rates, and a low maintenance footprint.

UAE Car Sales in 2021

The luxury segment

The luxury car is a status symbol for the wealthy in the UAE. Most people (and not just a certain percentage) enjoy a high standard of living in the UAE than in the rest of the world. Also, Dubai does not impose income tax on the income of residents (the country was a completely tax-free nation until 2018 and today its overall tax burden is pretty low compared to other nations).

As a result, luxury goods flourish in the UAE, with the luxury cars segment no different. Whether owing to the rise in the per capita income of consumers, the smooth road conditions, or the favourable tax regime; the luxury car market is witnessing solid growth in the country.

At present, the luxury car market occupies almost 15% of the total car market. Features like integrated entertainment systems, automatic safety features, and excellent finish of the interior and exterior of the car are pushing people to invest in luxury cars.

Commercial Vehicle Sales in UAE by Type (2019-2026)

Pre-owned luxury car market

The market expansion of luxury cars is not just on account of private owners but also rentals. In the UAE, renting luxury cars is a common practice. There are several online marketplaces where consumers can rent cars by hour or for a day or two. Tourists who seek to enjoy the UAE’s luxury lifestyle with ‘supercars’ are a growing group within this segment.

It is also popular for consumers to lease a vehicle for a flexible tenure. This removes the hassle of having to take responsibility for regular maintenance, and allows the flexibility to switch cars at any time.

During the pandemic, the used-car market in UAE got a boost and many people settled for second-hand luxury cars. As people were concerned with health and hygiene, people went for private ownership of cars instead of rentals. The financial situation also in part supported this shift.

The top luxury car players include BMW, Daimler and Toyota. Meanwhile, wealth accumulated during Covid-19 also is seeing more demand for high-end luxury cars such as Ferrari and Rolls-Royce, to name a few.

Electric fleet market

Globally, a gradual shift to electric vehicle is observed due to increasing concerns for climate change. Experts believe electric vehicles can revolutionise the transport industry since greenhouse gas emitted from vehicles is one of the largest contributors of greenhouse gas emissions.

Alongside sustainability benefits, electric vehicles are less expensive to operate and are low on maintenance compared to other modes of transportation.

Global Passenger EV Sales (Million Units)

The UAE’s electric vehicle market is currently in its early stages. There have however been some significant developments over the past years, with Dubai at the forefront.

Dubai has stated that by 2030, 10% of all vehicles will be electric or hybrid, and by 2050 the state aims to be the first in the region to be emission-free. In line with this, the government is also seeking to electrify its public fleet, with the Dubai RTA focusing on increasing its hybrid electric vehicle fleet.

Key driver is the UAE government’s Green Charger initiative. This initiative exempts toll charges on electric vehicles and provides free charging stations at DEWA Green charger locations. The government and various financial institutions are further providing incentives to encourage the import of electric vehicles into the country.

The high demand for renewable and emission-less vehicles while maintaining luxury creates profitable growth opportunities for the UAE electric vehicle market. In terms of revenue, the UAE’s electric vehicle market is expected to grow at a CAGR of 24.2 percent between 2022 and 2028.

In terms of major vehicle brands, Hyundai, Tesla, Volkswagen, General Motors, Renault-Nissan, BMW, Ford, and Mitsubishi are positioning themselves as key players in the region’s electric vehicle revolution.

UAE Passenger Car Market Sales Outlook in ‘000 units

The market’s outlook

Dubai will continue to act as the main automotive hub for major exports and re-exports of vehicles in the region. It is a leading exporter and re-exporter of automobiles to the Middle East and North Africa region. Whether due to its strategic location or favourable government policies or advanced infrastructure, the automobile industry will continue to flourish.

The used-car market demand as created by the pandemic will increase. Earlier in the year 2020, the used car market in the UAE was worth $12.6 billion. And it is further expected to grow at a CAGR of 5.7% to a value of $18.3 billion by 2027. The online portals selling pre-owned cars will contribute to this growth.