Like many other sectors, the automobile industry too had to face a slowdown, but instead of bowing to pessimism, car dealerships and automobile companies have used innovation to steer out of the lull that gripped the market in 2016.
Companies within the country dished out innovative schemes, attractive discounts and offers to woo the customers. The market witnessed many new marketing techniques that brought back many customers to car showrooms.
“The market was abuzz with new terms like ‘Lease to Own’ plan, ‘Free Upgrade’, ‘Guaranteed Buyback’, ‘Interest Free Installments’. Although, these plans differed from each other in many ways, they all had one thing in common – the promise of providing customers value for money”
The market was abuzz with new terms like ‘Lease to Own’ plan, ‘Free Upgrade’, ‘Guaranteed Buyback’, ‘Interest Free Installments’. Although, these plans differed from each other in many ways, they all had one thing in common – the promise of providing customers value for money.
Better value for money schemes
Almana Motors had launched a Free Upgrade plan, guaranteed buyback and interest-free installments last year during Ramadan. Almana Motors is the sole franchisee for many well-known car companies and it is the exclusive distributor for French car Peugeot and American brands Ford and Lincoln. It had launched a ‘One Mile’ offer which provided free upgrade to customers.
Under the offer if a customer paid for a base model, he would get a medium model. If a customer bought a medium model he would be eligible for a top model.
For example if a customer paid for an Explorer XLT he would be upgraded for free to an Explorer Limited. Under the offer the company covered most of the models and only few models were not included in this promotion.
For the 2015 models, the company offered to pay the customer deposit and interest-free installments for three years.
A senior official told BQ that this offer was made valid only for 2015 models. As for the 2016 models of Figo, Fiesta, Focus, Fusion and Ecosport, the company offered to pay just customer deposit.
The company had also introduced a guaranteed buyback short-term 24 monthly payments plan. Under this plan at the end of 24 months the customers would have three options. If he or she wished to retain the car they could pay the guaranteed figure and own it.
As per option two, the customer could bring back the car for revaluation and any value above the guaranteed figure would become their new deposit for the next vehicle.
Last year, during Ramadan, United Cars Almana (UCA) had launched a ‘Lease to Own’ plan for the first time, as per which customers were offered the option of guaranteed buyback after two years and comparatively low down payment that would be spread over three years. This was in addition to the option of normal financing plans in which customers could directly finance their dream car with UCA over three or four years. UCA is an authorized dealer of Chrysler, Jeep, Dodge and RAM in Qatar.
Luxury car segment price cuts
“The Qatari car market is dominated by SUVs and they have a major share in total car sales. They are loved by both Qataris and expatriates because SUVs offer elevated driving position, which gives them a sense of security”
Many car dealers resorted to price cuts in the luxury car segment, because this segment was worst-hit by the slowdown. A major car dealer even cut the prices of luxury cars by 3-5% last year in order to attract customers. “The strategy of reducing the price was to remain competitive in the market which was already reeling under the pressure of the slowdown,” a senior official from the car dealership told BQ.
Along with car price reduction, customers were also lured by offering home service for test drives and home delivery of new vehicles.
The car rental market was also not behind in offering discounts to customers. Hertz Qatar offered 30% discount during its Ramadan campaign. The strategy of new schemes and discounts was successful in bringing back customers who were shying away.
“I was planning to buy a car in 2016 and the initial plan was to buy it within the first three months of the year. However, my plan change a little after my friend advised me to delay my purchase by a few more months and wait for the Holy Month of Ramadan. Car dealers started offering and discounts and doling out freebies during the Holy Month,” said Subhash Ghosh, an IT Professional residing in Al Wukair. “I bought my SUV (Sport Utility Vehicle) at the start of Ramadan and my wait was suitably rewarded as I got accessories worth around QR6,000,” he added.
The Qatari car market is dominated by SUVs and they have a major share in total car sales. They are loved by both Qataris and expatriates because SUVs offer elevated driving position, which gives them a sense of security. It also offers good ground clearance which allows a driver to take his family on off-road trips. The versatile space in SUVs makes it a good car for family outings.
High disposable income and comparatively cheap fuel prices are the other major factors driving Qatar’s passenger car market. Apart from SUVs, compact sedans are also popular in the country.
Sedans, SUVs hold fort
“The market for sales of used cars is also big in Qatar. Many expatriates who come in Qatar for a comparatively shorter duration, prefer to buy a used car. This market also faced pressures as suddenly the sellers of used cars outnumbered buyers, which resulted in a fall in prices”
For many car dealers, there was no slowdown in sedan category, but the luxury car category was impacted adversely.
“We did not see any slowdown in the sales of sedans and SUVs and business for this category last year was same like any other year in the past. However, we did see a major slowdown in sales of luxury cars. There was a fall of around 60% in sales of luxury cars in 2016 compared to the previous year,” Tamer Abou Hamra, Senior Sales Supervisor at Auto Z, told BQ. Auto Z is a company that sells new and pre-owned vehicles of major brands.
“Usually in the past, we used to see a surge in sales happening during Ramadan and the holy month used to be a number one month in a year, in terms of sales. But, last year Ramadan witnessed a very normal kind of sales and it was just a normal month for us,” Tamer added.
The market for sales of used cars (also known as second-hand cars) is also big in Qatar. Many expatriates who come in Qatar for a comparatively shorter duration, prefer to buy a used car. This market also faced pressures as suddenly the sellers of used cars outnumbered buyers, which resulted in a fall in prices.
“Last year was very dull for the business and I did not remember seeing that much dullness in the recent few years. The cars which were selling about QR20,000 earlier, we had to sell for QR12,000 to QR13,000 and that to even after putting all efforts,” Mohammed Yassir, who buys and sells used cars in Industrial Area, told BQ.
“I saw the market changing its color in a span of just six months. Prices fell drastically within six months in the mid of last year, and I was unable to understand what has impacted the market. Within a matter of few months, buyers disappeared from the market,” he explained.
“Usually Ramadan and summer are good months for our business, when the market use to see hustle and bustle of customers, but last year it was not encouraging,” Mohammed added. “The signals this year are not encouraging and this year, so far, has also started on a dull note. I have not seen any business in the first fortnight of this year, which is not a good sign,” he said.
If we look at 2016, only March and Ramadan provided some relief to the car dealers while other months were not so encouraging in terms of sales.
However during the last leg of 2016, the business picked up momentum and sales surged in November and December.
But this is not an unexpected trend as sales of vehicles increase at the end of each year because of year-end discounts offered by car dealers across Qatar. Dealers and manufacturers want to ensure that stock is cleared by before the end of the year.
March 2016, best month
“A look at the data confirms the prevailing dullness in Qatar’s automobile market. The total number of vehicles sold in 2016 is likely to be less than 2015, the latest available MDPS data indicates.”
According to the Ministry of Development Planning and Statistics (MDPS), March was the best month in terms of car sales with 5,846 private vehicles being registered in March 2016, the highest last year.
A look at the data confirms the prevailing dullness in Qatar’s automobile market. The total number of vehicles sold in 2016 is likely to be less than 2015, the latest available MDPS data indicates.
Most of the months last year witnessed a year-on-year fall in the number of private vehicles sold in Qatar. The year started on a flat note with 5,452 private vehicles being registered in January 2016. This was merely 0.2% more than the 5,442 private vehicles registered in January 2015.
The automobile sector witnessed its first decline of 2016, in February when 4,958 private vehicles were registered, which was around 3% less than the 5,101 registered in the same month in 2015.
The decline was further accentuated in March when 5,846 private vehicles were registered during the month, which was considerably less than the 6,607 private vehicles registered in March 2015. Now the year-on-year decline had become a steep 11.5%.
April offered no respite to the automobile sector as there was 16% year-on-year decline in the private vehicle registrations, with 4,745 registered as against 5,647 previously.
The fall continued in May as well with 4,424 private vehicles being registered as against 5,245 vehicles in May 2015, reflecting a fall of around 16%. June witnessed a massive 29.4% year-on-year decline with 4,219 private vehicles being registered against 5,979 in June 2015.
The next month, however, provided a much-needed relief to the automobile sector as vehicle sales increased on year-on-year basis. A total 4,992 private vehicles were registered in July 2016. This was around 3% higher than the 4,857 vehicles registered in the same month, the previous year.
According to sector watchers, Eid Al Fitr brought smiles to the faces of car dealers and manufacturers. Sales were helped by Ramadan and Eid discounts and freebies offered to customers. However, August and September were lackluster months for the industry as most of the residents were out of the country due to summer holidays. Only 3,207 private vehicles were registered in September last year. The data for the month of August was not available on the Ministry’s website.
The industry again witnessed dullness as around 13% year-on-year decline was witnessed in October. A total 5,377 private vehicles were registered in October 2016 compared to 6,194 private vehicles registered in the same month in 2015.
Although, year-end offers and discounts boosted sales in November, it was not big enough to cheer the sector. A total 5,488 private vehicles were registered in November 2016 as against 6,771 in November 2015, registering a fall of 19%. The data for the month of December is yet to be released by the Ministry.
Strong auto growth forecast
“The mood among the local car dealers remains upbeat for the future. “Oil prices and population are the two crucial factors which have significant impact on the Qatar’s automobile sector. Newspaper reports citing government data, show that the population of Qatar continues to grow, which is a very supporting factor for the automobile sector.”
However, going forward, better days are ahead for Qatar’s automobile sector. Experts believe economic growth in the country will pick up in coming months which will push up the sales.
BMI Research, a Fitch Group Company, expects strong growth for Qatar’s car and commercial vehicles market in the coming years.
“Against a mixed economic outlook, we forecast 3% growth for Qatari new vehicle sales in 2017, following a near-16% fall in sales in 2016. The most recent new vehicle sales data continue to bear out our caution towards the Qatari market at present, with overall demand remaining weak. We expect stronger growth in passenger car sales than commercial vehicle sales across our forecast period to 2020,” BMI Research noted in its forecast in ‘Qatar Autos Report’.
The mood among the local car dealers remains upbeat for the future. “Oil prices and population are the two crucial factors which have significant impact on the Qatar’s automobile sector. Newspaper reports citing government data, show that the population of Qatar continues to grow, which is a very supporting factor for the automobile sector. Similarly, oil prices are moving in the upward direction. Both these two factors are moving in the right direction for us,” said a senior official of a car showroom.
The outlook for oil prices has improved markedly in the past few months. Oil prices are currently at $55 per barrel, 17% higher than the average of $47 per barrel in the third quarter of 2016. “We expect oil prices to continue rising to the $60 per barrel level if the production cuts recently announced by Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC are fully implemented,” QNB noted in its recent report.
“Compared to 2016, we expect a continued positive trend in oil prices in 2017-18, which should support a recovery in growth with the non-hydrocarbon sector as the main driver. Nonetheless, fiscal deficits are expected to continue and the recovery is likely to be moderate with headline real GDP forecast to be 3.8% in 2017 and 4.1% in 2018,” the report said.
After a tough 2016, Qatar’s automobile sector is set to move in top gear in coming days.
This article is from BQ Magazine’s Issue 41 – February 2017.
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