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Dubai's used car market moves into the slow lane

DUBAI - Dubai Used Cars Automobile Zone (DUCAMZ), the biggest used car market in the Gulf, is facing an unprecedented slowdown business.

The downturn comes after several years and has been by triggered the unstable political scene in the Middle East, say used car dealers and analysts.

With over 95 per cent right-hand used cars being imported from Japan and the remaining five per cent from Korea and Singapore, the Dubai market has for years been a major hub and re-export market for car dealers from the Saudi Arabia, Afghanistan, Iraq, Yemen as well as Africa.

Speaking to Khaleej Times, Iqbal Dawood, President of the DUCAMZ association, confirmed that the world's biggest concentrated market of used cars was undergoing a severe depression.

"Dubai is a re-export market, and as several mini-free zones have been set up in many other parts of the world, we are losing many good markets, especially the one in South Africa," he said.

Khalid Rana, owner of Al Sayegh Motors in DUCAMZ, says that the used cars market had slowed down considerably due to several reasons, the major one being the political unrest in the Middle East.

"Market saturation is also a major factor that has led to a slowdown. Besides, the Dubai government has also made several changes in the facilities being offered to the dealers, leading to huge investments being utilised elsewhere," he said.

Mr Rana, who is also an adviser to the association, said that the Dubai Ports and Customs Authority had reduced the demurrage time limit for imported cars at the ports from 45 to 30 days, which had also affected the business.

"In this business, there's no saying can be no speculation in this business as to when it will pick up again. The summer moths are always slow, but this year has especially so," he added.

In reply, spokesperson from the Dubai Ports and Customs Authority said, "Due to a 40 per cent annual increase in handling of vehicles, the DPA had to rethink its strategy related to long-term storage."

He also said that the prime reason for the reduction of the days was due to the surge of T/S vehicles for Iraq through DPA.

"Unfortunately, these vehicles have remained at our ports for a very long period which subsequently pushed the DPA to reduce the free time in an effort to encourage faster movements," he added.

Another car dealer said that most dealers in the premises were being forced to sell their cars for cheaper rates because of the money they had to pay to the Dubai ports authority.

"We have excess cars now with no place to keep them. We're already paying demurrage at the ports, and the DUCAMZ premises are also overflowing. We have no option but to sell the cars at cheaper rates," he complained.

Earlier last year, the executive chairman of Dubai Ports, Customs and Free Zone Corporation had announced several new facilities that were being provided to used cars dealers by the UAE government.

Among the several facilities, the Dubai right-hand car dealers were provided number plates for imported cars instead of the earlier 'import licence' number plates that were being used.

Mr Dawood, who is also the owner of Atlantic Motors and Al Hamrah Motors, said that the 400-odd showroom owners at DUCAMZ were enjoying facilities granted to a free zone, including a one-window operation, no custom duties on cars and visa facilities as well.

Regarding the facilities being offered to all used car showrooms dealers, a spokesperson from the Dubai Ports and Customs Authority said, "All the showrooms in our facility have the benefit of the following features including 100 per cent foreign ownership, no import/export duties, no restrictions on maximum import of automobiles, no personal income and capital taxes, no corporate taxes for 50 years - a concession that is renewable - 100 per cent repatriation of capital and profits, modern and efficient communications, no recruitment problems, no administration problems as well as direct attention to all the showrooms-related matters personally by the director of DUCAMZ as he quotes "My door is always open."

He also said that there was a hassle-free clearance from Customs, Police (Traffic department), ports and banks. "There are also excellent support services from Dubai Ports Authority, competitive freight charges, transfer of lease ownership within the zone," he said.

Besides other facilities, service institutions utilised for the showrooms in the zone include shipping clearing companies, insurance companies, banking and exchange, automobile workshops, restaurants and typing and photocopy office.

The spokesperson also said that there were 386 registered used car dealers at present in the zone.

Appreciating the facilities provided by the government, the dealers said though the government had provided a one-window operation for easy processing of the car registration papers at the DUCAMZ premises, more incentives were needed, including lowering of rents.

Explaining, Mr Dawood said that since the establishment of DUCAMZ in 2000, the Jebel Ali Freezone had increased the rents of the shops two times, hence lessening the profit margin.

"We are now paying Dh39,000 for a 10,000sq feet and in this time of depression, several showroom owners are being affected," he said and asked the Jebel Ali Freezone authorities to reconsider their decision regarding rent hike.

"We have made investments of billions of dirhams and require more returns and incentives from the government such as easy provision of visas and the previous time limit for imported cars at the port so that we are saved from paying demurrage in these difficult times," complained another dealer.

Some operations face shutdown

SHARJAH - The used cars dealers in Sharjah are complaining of a slowdown in business.

"Decisions are being taken on shutting down showrooms as we can longer bear the expenses," said a dealer from a big showroom in Abu Shagara area.

Sharjah's car market is the biggest outlet for privately owned left-hand car showrooms.

"Our cars serve the local market as well as several dealers who come in from Saudi Arabia, Iraq and Afghanistan," said the owner of Al Qamar Motors.

"The market situation is fairly bad due to most obvious reasons which include the closing of borders at Iraq, and the situation in Afghanistan," he said.

Other dealers say they were running out of parking space for their cars and were bearing heavy losses as demurrages.

"Our investments worth billions of dirhams are blocked and there are no signs of the market picking up. We have no option but to close down our showrooms here and even those in Japan from where we import these cars," they said.

"If it happens such, then several people will be jobless," they said, adding that the UAE's biggest market of used cars was facing an uncertain future and chances were that it would remain so for a long time.