Purchasing a motor vehicle is a major investment, whether the cost is paid in full or through installmen plans. Many buyers feel that once they buy a vehicle, a dealership feels their work is done.
However, this is far from the case as all vehicles have to go through routine checks after a certain amount of miles as well as regular repairs for anything from worn brake pads to battery replacements.
Through various social media platforms, vehicle owners in Qatar have often expressed their disappointment at the levels of service offered at authorised centres and the prohibitively high cost of spare parts, especially when compared to the rest of the GCC.
Frost & Sullivan research shows the spare parts market in the country showed a CAGR of nearly 12 percent in 2009-2014, 10 percent in 2013-2014 and a projected eight to nine percent from this year till 2020. Ayman Zayan, ACDelco service centre’s manager, says the spare parts market is set for a growth of 60 percent next year but will taper off to 17 percent the following year.
Nasser Bin Khaled & Sons (NBK) represents BOSCH in Qatar. Raffi Keuylian, general manager, heavy equipment, projects the growth of the spare parts market at 10 percent per annum.
“This is based on actual car park figures and good sales for new cars and trucks. However, if the oil price remains at a low level for the coming few years, this will have a negative effect on government expenditure, and purchasing power of new vehicles, hence, a decline in service and parts consumption. A synchronisation to UAE customs rules and processes and opening of a free trade zone will make this country even more attractive for future investments and fuel market growth,” he says.
More expensive in Qatar
In a study by Bahrain’s Ministry of Commerce and Industry, in cooperation with Oman’s Public Authority for Consumer Protection (PACP), it was found that prices of spare parts in Oman are the highest among all the GCC countries by as much as 50 percent.
It is not just Omanis who are complaining about costly auto parts, Qatar faces a similar problem. In 2014, spare parts’ prices rose by 15 to 30 percent.
The regional spare parts market is set to be valued at USD 16.8 bn by 2020, up from USD 9.5 bn in 2013, a reflection of more vehicles hitting GCC roads.
Acknowledging that spare parts’ prices in Qatar are the highest in the GCC region, Zayan states there is a valid reason for this.
“The major driver for higher than average goods and service prices (not only spare part prices), are shops, storage and land prices or rent rates. The land prices and rent rates are over 30 percent higher than Saudi Arabia and 20 percent higher than the UAE. This is a main factor for price increases, as they are charged directly to goods and services and indirectly, towards staff housing allowances.”
On parts being higher priced in Qatar, Subhash Joshi, head of automotive and transportation practice at consultants Frost & Sullivan explains: “Before understanding which category of parts are costlier and which ones cheaper, we need to understand how the replacement market works. Broadly, the replacement market is divided into two categories: original equipment supplier (OES) and independent after-market (IAM). Under the OES category, the parts are supplied through authorised dealerships only (mostly 3S/2S facilities of authorised vehicle dealers), this category accounts for about 20-30 percent of the total parts market in Qatar and has a very limited presence of counterfeit products as OES is a highly restricted channel where a dealership can only sell vehicle manufacturers’ genuine parts; e.g. Hyundai (Mobis), Toyota, Ford (Motorcraft), Dodge (Mopar) genuine parts.”
In the OES channel, pricing is definitely high in Qatar when compared to Saudi Arabia and varies with each part. Prices in Qatar are 10-12 percent higher than Saudi Arabia for the Toyota Yaris, Corolla and Camry, 10-12 percent higher for the Hyundai Accent and Elantra, eight to 10 percent higher for the Sonata and as much as 15-18 percent for SUVs. The price difference is much higher for Ford and Mazda vehicles.”
However, Joshi adds, it would be wrong to say that prices of all parts are higher in Qatar. “The high prices of the parts are limited mostly to service body parts. For pricing in the IAM channel, our analysis shows prices in this market category are almost similar to pricing in the Saudi market. We have not seen major price differences here. However, prices of transmission and engine parts are higher due to high inventory carry costs.”
Keuylian also cites multiple reasons for parts being more expensive. Factors could include difficult import procedures and over-average landed costs, adding to high rents for shop locations. Most of the parts are shipped to Dubai and later to Qatar which also adds to costs. “Prices may be lower in the UAE as it capitalises on their Free Zone, and the re-exporting to neighbouring countries. Also, being a major hub has its advantages,” he says.
On the other hand, IAM is an independent market where anyone can deal in parts and can be imported from any country for any brand. Here, the vehicle owner goes to local workshops to repair his vehicle or a local parts retail shop to buy parts. “This is an area which has highest problem of counterfeit parts around the globe,” Joshi explains.
While many vehicle owners opt for independent garages as a way of avoiding waiting or perhaps as a cheaper option, Ahmed Abd El Fattah, Jaidah Automotive after sales manager advises: “If you are looking for long-term quality, peace of mind and low expenses, we always recommend our service centres to our customers. They will provide professional services and fix the vehicle in the first attempt. Other than our main Chevrolet workshop, we have four GM-Certified Quick-Service Centres located across various areas in Doha.”
Keuylian says: “We are offering all services, except body work. So, from an oil change, brake service, wheel alignment and tyre service to AC repair and an engine overhaul, we do everything mechanical and electrical.”
He continues: “When new cars exhaust their warranty, it is normal that owners try to get services done at lower costs instead of going to the importer. Our advantage here at Bosch Car Service Centre is that we offer the same quality of an importer but at a lower price. We give a one-year warranty for Bosch parts and our services, which gives security to our customers.”
Often the work done at independent garages can be shoddy, so there are many occasions when vehicle owners turn up at the BOSCH service centre as customers are usually unhappy with the work done at these smaller workshops and the damage done needs to be rectified.
One in four parts is fake
Counterfeit spare parts in circulation in the country are also a problem and can lead to long-term damage to a vehicle. In fact, the GCC counterfeit spare parts market is valued at a whopping USD 2 billion and is going strong despite crackdowns by authorities in the region.
It is very difficult to estimate an accurate market size for counterfeit/fake parts; however, based on discussions with local companies, Joshi estimates they make up 20-25 percent of the total automotive parts market in Qatar.
Joshi says: “Counterfeit parts have become a major issue in most of the GCC countries, including Qatar; however, strict consumer protection regulations and regular raids by local authorities have restricted the free flow of such parts in Qatar.”
He adds that some manufacturers, like GM and Ford, have organised customer education programmes in Qatar to ensure that the end-customer is aware of the disadvantages of counterfeit parts, but the frequency of such programmes is not high.
There are eight to nine key categories of parts, mostly fast-moving ones, which are counterfeited. The key ones include friction parts (brake shoes, brake pads, brake linings) and other brake parts (e.g. brake drums, discs, oil and air spark plugs, etc.).
Keuylian puts down the relatively easy availability of counterfeit spare parts on ineffective control mechanisms at customs and the market itself, “as there is almost no brand loyalty with the end consumer.” The business is very much regulated by the sales price itself.
He says: “The average customer buys parts at a cheap cost instead of buying quality, hence the growth of Chinese counterfeit parts. More effective customs controls regulations should be imposed and of course, educating the customer to minimise the counterfeit population.