The economy of the UAE has faced crises in the last decades. It also faced declining oil price, which is one of its main economic driver, as well as crises in the real estate sector, another economic driver of the country. With such situations, how is its automotive market going according to market research UAE?

Economic Environment

The oil sector hasn’t recovered yet while the non-oil sectors are growing rapidly. Although non-oil sectors do grow rapidly, it noticeably slows down in the fourth quarter of 2018. This happens due to reduced external demand. While the price of oil is declining in the fourth quarter of 2018, the country’s oil production has increased significantly during the same period.

The slowdown in the fourth quarter of 2018 is expected to be temporary since business confidence is good during the same time period. That said, the country’s economy is still sensitive to the fluctuations in the oil market. For 2019, the economy of the country is likely to be driven by the construction sector, thanks to the Expo 2020.

The Introduction of Value Added Tax

Value Added Tax or VAT has been introduced in the UAE market for the first time in January 2018. The rate is set at 5%, as agreed in the Common VAT Agreement made between six GCC member states in June 2016. This, of course, affects the automotive market. The VAT is applied to most goods and services, including automotive.

The VAT is quite unique in the UAE. This is because the UAE, as well as other Gulf states, has been attracting not only foreign workers but also capitals with tax-free living. This is something which made impossible thanks to the introduction of VAT. For the UAE, this breaks a milestone, so to speak.

Current Market Trend and Outlook

Other important aspects of market research UAE is the current market trend and outlook. For the current market trend, the country’s market has faced crises in the last decades which is followed by a period of significant expansion. In 2012, the sales number is about 291,000. Three years later, in 2015, the sales number hit an all-time record with 408.252 sales.

After the period of significant increase, the demand for vehicles is declining. Last year, in 2018, the sales number is down to 247.552 sales. This is almost 40% of the record level in 2015. The contraction in demand is related to the decline of oil price, which is a significant economic driver of the country.

Will the decline continues for the future market? On the contrary, market research UAE predicts that the outlook of the automotive market in UAE is expected to recover. There are three reasons why recovery in the automotive market is expected: the demand shift to environmentally-friendly vehicles, growing population due to immigration, and robust investments in the country.

The automotive market in the UAE has a positive outlook despite the country is still recovering from the declining oil price. Among other things, the used car market is likely to be consolidated in the near future. The automotive market size is expected to grow, albeit due to the demand for supercars that has been increasing recently.