Monday, May 29, 2017

Dubai

The Al-Futtaim owned Automall — the pre-owned vehicle retailer — is all set to move into its biggest site to date, at Dubai Festival City (opposite the Ikea store).

And rather than showcase all of the models within a dedicated showroom, they are going wide and open and be more in sync with how secondhand cars are sold in the US. The site will be able to handle up to 400 vehicles. (Another two — though smaller — locations are in the plans, in Abu Dhabi and Sharjah, and able to handle about 150 cars apiece.)

For Automall, the investments are confirmation that dealerships here are getting a better grip on used-car market dynamics. “In 2006, the new car market was rocketing ahead of used cars — in fact, certified used car schemes [from dealers] did not exist at that time,” said Declan McCluskey, Managing Director of Al-Futtaim Automall.

As things stand now, Automall estimates suggest that dealer certified used car schemes represent about 40 per cent of new car sales in the UAE. (After peaking at over 400,000 new car sales in 2013-14, volumes dropped significantly — by 23-27 per cent — in 2016. And that comes on top of a double-digit decline in 2015.)

“In [western] markets, it is usually 4-6 times higher for used cars vs new. As of now, in the UAE, the used car market [both sold through dealerships and dedicated used-car dealers] is said to be about 1.2 times that for new cars in terms of transactions a year, but that’s still questionable.”

In the last four years, just about every major dealership in the UAE has built up a used-car sales programme to run parallel with their new car push. Not just that, they have even gone to extent of creating dedicated showrooms that rival the look and feel of the new car facilities.

But with all the incentives dealers are now throwing behind the new car sales incentives, will used car demand take a bit of a dent this year?

“If new car prices go down, used cars will follow... these have to adjust accordingly,” said McCluskey. “The average stock length of a car at Automall is 37 days versus the 45 days for most used car dealers.

“New car sales were between 23-27 per cent down last year depending on the market — but Automall was up 2.5 per cent in volume sales.

“I don’t think Q4-17 will be difficult as dealers go big with promotions ahead of the VAT [value added tax] introduction early next year. Anyone wanting to buy a new car then usually has a car to dispose off — so there is an opportunity for us to increase stocks.”

Automall stocks models that are up to five years old. There is also a “value collection” range with vehicles that are up to a seven-year vintage. All units Automall stocks are sourced only from within the UAE.

In this, its ties to Al-Futtaim Group’s other interests are a help. The Group is the franchise for Hertz, the car rental company, and Automall has first call on buying those units once they have reached a certain usage level.

“We also source from a network of dealerships as well as buy in the open market,” said McCluskey. “Automall has not experienced a stock issue and continue to sell and trade 400-450 cars per month on average. And 90 per cent of buyers will use the cars locally.” (The priciest model it sold in the last 12 months was a 2016 Porsche Cayenne GTS for Dh369,000.)

Going forward, the plan is to get into Oman at some point, and thus take the brand beyond the UAE. “It has a more stable used car market [than some of the other regional options],” he added.

By Manoj Nair Associate Editor

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