A recently released Dubai Chamber of Commerce and Industry study shows indications of rebound in auto exports to UAE which went up in the early months of 2010 and the trend is said to continue during the latter part of the year. Earlier, the global financial crisis had negatively affected capital formation and consumer spending on durable goods and one of the hardest hit sectors was the auto sector, as reflected by the bankruptcy of the US giant General Motors Company (GM) and the scaling down of production of other motor companies.
It was only in the latter part of 2009 that plans to beef up inventories began to materialize, focusing on production of more fuel efficient and small car models.
The study further indicated that vehicles form one of the largest product imports of the UAE; both for meeting local demand and for re-export. In the preceding 2 years before the impact of the global crisis hit the UAE, imports of the products had been rising at double digit rates. In 2007, the UAE reported total imports of these products amounting to $11.7bn, or 9% of total imports during the year. The share went up to $17.3bn a year later, leading to an increased share of 10% of the total imports from the rest of the world. The figures translated to a 48% year-on-year growth.
Japan dominated UAE’s import market for the products, with imports from the country accounting for 38% of the total group imports. Japan’s dominance further grew in the following year, with the import value reaching $6.8bn, or 39% of the product total. A 52% growth (y-o-y) was noted for the UAE’s imports of the products from Japan. On the other hand, despite the 33% increase in the value of imports of the same product group from Germany in 2008 to $2.7bn, the share to group total declined from 17% to 16%.
Imports from USA during the two years prior to the global crisis also reflected a 47% increase, from $1.5bn in 2007 to $2.2bn in 2008, for a share of 13% to the group’s total. With very strong campaign, vehicles from South Korea had been gaining significant grounds in the UAE’s market. From $564m, imports from the country rose by 55% to $871m. The same pattern was also noted for UK, with imports increasing from $513m in 2007 to $814m a year later. Though comparatively smaller, China’s share in the UAE market had grown considerably, from $390m to $587m in a year, or by 51%. Australia, though remaining to be a major supplier of the products, had posted a relatively sluggish growth of 6%, to $427m in 2008.
Monthly exports of UAE’s major suppliers peaked in 2008, but dropped considerably in 2009. While indications of rebound in exports to UAE in the early months of 2010 could be noted for some countries, others continued to decline.
The study also revealed that exports of the leading suppliers of vehicles to the UAE started to show signs of rebound in early 2010. Compared to the record high in 2008, Japan’s exports of the products declined by 64% in 2009, and continued a monthly decline of 20% in January 2010. However, the following month witnessed a reversal in trend by 5%; which was eventually followed by a substantial monthly growth of 71% in March.
Comparatively, recovery of Germany’s exports of the products to UAE was more pronounced. From an annual decline of 46% in 2009, rate of monthly changed reversed from -38% in January 2010 to growths of 35% and 30% in the next two months. The USA also showed signs of recovery, with March 2010 exports rallying by 29% over the previous month’s value, following a nearly constant value from December 2009 to February 2010, and an annual decline of 55% in 2009.
Although UK’s exports had ceased to decline in February 2010, no significant increase has been noted after the annual slump of 59% in 2009 and a monthly decline of 36% in the beginning of 2010.
With consumers remaining to be cautious, improvements in auto sales are expected to remain modest in the short-term. Positive expectations, however, prevail over the medium to long-term, especially for smaller and fuel efficient models.
