GCC new car sales dip 30% in Q1 with further pain expected

New car sales in the Gulf Cooperation Council dropped 30 per cent year-on-year in the first quarter with little sign of improvement in the months to come, according to Autodata Middle East.

The firm said the reduction, with the heaviest losses seen in Bahrain (41 per cent), Saudi Arabia (38 per cent) and the UAE (28 per cent), followed a 27 per cent dip in new car sales last year and resulted in dealers holding too much stock of new and used cars.

To push this stock, firms increased their consumer offers and manufacturers upped financial support on new cars, putting pressure on the certified pre-owned segment and making it uncompetitive, Autodata said.

“The elephant in the room was the fact that in real terms, new cars became cheaper. This had the effect of making certified pre-owned cars look even more expensive and so sales of these slowed,” the firm added.

“As long as the manufacturers continue to push new cars into a shrunken market their residual values will fall.”

These deals did lead to some increase in showroom traffic but sales were considered as normal and not exceptional during the Ramadan/Eid period, with those offering the best terms seeing the most success.

Despite the declining market, Autodata said distributors might see increased interest in certified pre-owned cars due to different treatment under value added tax when it is implemented next year.

In contrast, some analysts believe the impending introduction of VAT on January 1 will lead to a rush of new car sales as consumers seek to save money before the 5 per cent rate comes into effect.

Read: Top 8 predictions for the GCC’s automotive industry in 2017

“We, at Autodata Middle East have been highlighting the fact that this is not a ‘downturn’ but a market correction for the last six months,” said Ian Batey, general manager at Autodata Middle East.

“This correction has been 18 months in the making and we believe that this is the new normal. The market has now stabilised. We do not forecast any market growth until 2019 and then only a modest 5 per cent.”