Gas-guzzlers, luxury cars back on UAE roads

DUBAI (Reuters) - Saad Atta haggles with a salesman at a luxury car showroom near Dubai’s busy thoroughfare to trade in his five-month-old Toyota for a $100,000 Porsche Cayenne.

A visitor looks at a Rolls Royce Phantom during the Dubai Motor Show December 15, 2009. REUTERS/Mosab Omar

“Every couple of months you have to change your car,” said Atta, a general manager at a furniture trading company in Dubai.

“I want to buy this one because it’s a new design and, of course, I want to impress girls,” he said, trying to get rid of his Toyota FJ Cruiser sport utility vehicle (SUV).

The global financial crisis hit the car market hard in Dubai, whose expatriates were once famous for blowing their tax-free pay on luxury cars, designer clothes and large villas.

With multi-billion dollar real estate projects shelved, talk spread that expatriates who had lost jobs and defaulted on loans were abandoning their cars at the airport and flying home.

As Dubai begins to recover, gas-guzzling four-wheel drives once more choke its 12-lane Sheikh Zayed Road. Ferraris and Maseratis again line the entrance to the Mall of Emirates.

“People are buying expensive cars again because they want new options and they want to stand out,” said Abdallah Muftah, 26, who owns four luxury cars. “I might buy another one this year,” he said, standing outside a showroom.

Home to just five million people, the United Arab Emirates is the world’s fourth-largest market for Rolls-Royce. The firm said sales more than doubled in the first nine months.

UAE new car sales could climb to 210,000 units this year and 240,000 in 2011, according to IHS Global Insight, up from estimated 180,000 last year but still short of 324,000 in 2008.

While the growth is slower than it was in the oil boom years, when the UAE elite was flush with petrodollars and access to credit was easy, the upturn suggests confidence is returning to the second-biggest Arab economy.

“In 2010, the customers’ confidence started coming back,” said Michel Ayat, general manager at Dubai-based Arabian Automobiles, one of the UAE’s biggest dealerships.

Passenger car sales are estimated to have risen 7 percent in the first nine months from a year ago, Ayat said. From January to August, some 146,000 cars were sold, a 6.6 percent increase.

That compares well to Europe, where car sales fell for a sixth straight month in September as demand suffered from the end of scrappage schemes and uneven recovery.

“People are starting to adjust their lifestyles again, and believe the situation has bottomed out,” said Anthony Silver, who recently bought a used car in Dubai.


Plans to phase out fuel subsidies in the UAE, the world’s No. 3 oil exporter, may trim demand for powerful cars, but a 26 percent jump in petrol prices this year has yet to hit sales.

“Fuel price remains still way below EU and U.S, levels,” said Stephanie Vigier, senior market analyst at IHS Global Insight in Paris.

But it is not just the market for luxury cars that is recovering. Japanese cars account for over 70 percent of the UAE car market and their sales are outpacing the overall growth rate, dealers said. At a Nissan showroom in Dubai, 10 to 15 clients pick up new cars every day, a sales manager said.

Back in 2008, when record oil prices helped fuel ambitious projects such as palm-shaped residential islands in Dubai, UAE car sales booked a 22 percent rise after a 37 percent jump in the previous year, driven by easily accessible loans.

Banks now ask that borrowers have a monthly salary of at least 5,000 dirhams ($1,362), up from 3,000 dirhams before the global crisis, Vigier said, a rule that is slowing car sales.

Some UAE banks have eased loan criteria since March, but often only when a large down payment of the car value is made. Some banks have even doubled the maximum car finance credit limit, so borrowers can afford more expensive cars.

“Stricter banking rules and higher interest rates will curb new car sales,” Vigier said. “We think that it will be difficult to come back to the 2008 level as the government has learnt the lesson and will not open widely credits and car loans.”

($1=3.672 UAE dirhams)

Editing by Lin Noueihed