The road ahead for automotive players in the UAE and KSA

10 October 2023 8 min. read

Global strategy consulting firm Simon-Kucher has released the 2023 edition of its annual Global Automotive Study, shedding light on the main trends and developments in the industry. Lovrenc Kessler, Chris Bergman and Samer Yamin from the firm’s Middle East team walk through the key insights for the UAE and Saudi markets.

In a period marked by unprecedented global shifts and challenges, the automotive industry is at the forefront of transformation. Among many challenges, the sector is undergoing rapid change driven by technological advancements, evolving consumer preferences, shifting market dynamics, inflation, and supply chain disruptions.

For all players in the automotive sector, from manufacturers and OEMs to dealerships and ecosystem stakeholders, understanding the tectonic shifts taking place is key in order to shape their responses and strategies.

Purchase Drivers

Purchase drivers and brand consideration

As the automotive ecosystem evolves, price is still the top vehicle purchase decision criterion, followed by other price related attributes such as maintenance and energy consumption costs.

In addition, the shifting market landscape is now paving the way for both established and non-established brands to make their mark, capitalizing on a customer base that is open to purchasing cars from diverse country origins.

While German and Japanese automotive brands displayed strong consumers' perceived value, with over 80% brand consideration across both the UAE and KSA markets, the emergence of Chinese brands poses a competitive threat (at 56% consideration), as they gradually get closer to achieving the market share of long-time established players.

Online versus offline channels

Customers in the UAE and KSA emphasize a hybrid approach to vehicle purchasing, valuing both online and offline channels. As a result, the omni-channel experience, which seamlessly integrates both online and offline purchasing, has gained greater importance where customers seek convenience, regardless of the purchasing option.

Online Purchasing, In-Person Buying Significance

Notably, around 83% of respondents in both UAE and KSA prefer to start their purchasing journey on dealer websites, emphasizing the significance of a strong online presence for automotive businesses. This digital trend is complemented by a significant preference for in-person negotiations (85% preference across both markets), highlighting the need for seamless integration between digital platforms and physical showrooms.

Another trend that emerges is the rising popularity of vehicle leasing services. A notable 83% of customers express openness to leasing contracts, stating that getting offered complimentary value-added services including insurance, service contracts and maintenance is of highest value. Moreover, the ability to select the duration of lease and allowed car-mileage of a contract allows customers to tailor their selection to their individual needs further strengthening consideration.

Leasing Consideration

Digital services and data sharing

Digital services are at the core of the automotive ecosystem and have the potential to catalyse the industry's transformation. Over 80% of customers across both markets value such services, including smartphone apps, and digital in-car apps and services. In addition, 82% are open to sharing car-related data with manufacturers, reflecting the growing belief of data’s potential to personalize and enhance the ownership experience.

This trend highlights the shift toward interconnected vehicles and the seamless integration of technology into the driving experience. As vehicles evolve into smart machines, consumers are eager to embrace the convenience and enhanced functionalities offered by digital services.

Digital Services Importance

Electric vehicles

The increasing relevance of electric vehicles (EVs) is reshaping the way customers view transportation, requiring a need of sustainable and innovative mobility solutions. 79% and 72% of customers in UAE and KSA, respectively, are now considering electric vehicles for their next purchase.

Sustainability and an improved driving experience are the biggest factors influencing this choice. The high consideration and importance of reduced emissions, cost savings, and cutting-edge technology positions electric vehicles as a pioneer in the automotive market.

Engine Type Consideration

Autonomous vehicles

In recent years, autonomous driving technology has rapidly evolved, promising a future where vehicles can navigate and operate on roads with minimal or no human intervention, revolutionizing the way we perceive transportation. This prospect has gained the interest of customers, with 80% in UAE and KSA expressing a high degree of interest in this technology.

Autonomous Driving Consideration

Despite the excitement, questions regarding accountability in case of accidents in autopilot mode remain unanswered. Notably, 64% of respondents believe that insurance providers should cover damages versus 33% on manufacturers, highlighting the need for clear liability frameworks to address potential incidents.

Further reading: Emirates one of the most primed for the advent of autonomous driving.

The way forward

Leveraging these insights, automotive players in the UAE and KSA are advised to refine their strategy and approach, to move towards commercial and operational excellence, all while strongly positioning themselves in the long-term. Seven recommendations:

Offer competitive pricing and promotions
Creating competitive pricing strategies and promotional offers that resonate with price-sensitive customers is key. Moreover, highlighting cost-saving aspects and value for money through marketing campaigns, and offering flexible financing options, can further capture consumer consideration and conversion.

Strengthen brand reputation
Consistent quality, innovation, and reliability are of high significance for building a strong brand reputation. Focusing on differentiating brand factors and unique selling points will enable automotive players to stand out in an ever-competitive market.

Improve omni-channel experience
The high customer preference of going through both, online and offline shopping channels when purchasing a vehicle raises the need of a seamless integration between digital and non-digital streams. Hence, enhancing the digital experience through user-friendly interfaces and training sales teams to provide personalized and engaging offline negotiation experiences will further boost customer satisfaction.

Offer flexible vehicle leasing services
Tailoring vehicle leasing services and offering flexible package options to cater to individual customer needs is key. Furthermore, strategically offering complimentary benefits such as maintenance, service contracts, insurance, and roadside assistance can enhance the overall value proposition and attract more customers.

Enhance digital services and data sharing
Investing in user-friendly digital services, including mobile apps, will enhance the after-sales experience and address the growing demand for digital engagement. Additionally, addressing data privacy concerns with impenetrable security measures is crucial for building customer trust.

Educate customers on EV benefits
Collaborating with stakeholders to raise awareness about EV benefits, including long-term cost savings and environmental advantages, will encourage further adoption and hence greater sales. Collaborating with local authorities and energy providers to establish supportive policies will expedite the transition to electric vehicles.

Invest in autonomous vehicles technology
Focusing and investing in research and development of autonomous vehicle technology, with a strong emphasis on safety and reliability, will be instrumental in shaping the future of mobility. In addition, collaborating with insurance companies and regulatory bodies to establish liability frameworks will further build confidence in autonomous vehicles and attract the rejectors.

In conclusion, in a time where the automotive landscape is evolving faster than ever, the road ahead is covered in both uncertainty and potential. As consumers in the region prepare to embrace electric vehicles, autonomous driving, and interconnected digital experiences, the stage is set for a remarkable transformation.

By aligning with evolving consumer preferences, harnessing the power of digital transformation, and embracing sustainability and innovation, the region’s automotive industry can redefine the road ahead.