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UAE a key car and LCV market in AGCC

DUBAI - Fuelled by the economic diversification and rapid population growth, the UAE has emerged as a fast growing market for cars and light commercial vehicles (LCVs) in the AGCC region. According to a report by Global Insight, a London based research organisation, the UAE accounts for 24 per cent of the market share in cars and LCV sales the AGCC region while Saudi Arabia and Kuwait have 46 per cent and 13 per cent respectively.

The study which makes a forecast of the Middle East and Africa (MEA) car and LCV markets shows that the 11 Middle East and African markets covered by the study have grown 77 per cent during the past eight years, and has big potential for higher growth in the coming decade.

Tim Armstrong, senior analyst with the Global Insight Automotive Group said: "Although in total volume terms the markets are still modest, carmakers wishing to grow faster than the world average should make sure the Middle East markets form part of their global growth strategy."

The study shows the stark contrast between the markets of the Middle East and Africa. The Middle East car and LCV markets have grown 149 per cent since 1995, which is definitely faster than any other region, while the African markets such as Morocco, Egypt, and South Africa reported under 10 per cent (average 8 per cent) growth during the same period. "There will continue to be a wide variation in market performance over this period with some countries continuing to expand, while others languish around current levels-making it imperative not to see the region as one unit. Nonetheless, we expect the MEA region to grow by more than 50 per cent within the next decade,” Armstrong said.

In the Middle East, he identifies Iranian as the largest growth market. Being the only production location in the region, the Iranian market has seen spectacular growth in recent years. Iran will continue to be the main country of growth over the next decade, and significant progress has been made attracting investment, particularly from PSA and Hyundai. Further moves to open the industry to the international community are taking place prompting recent investment announcements by Renault and VW.

"Iran will continue to be the main country of growth over the next decade, and progress has been made attracting investment, particularly by PSA and Hyundai, through a series of 'half-way' deals covering production licences and technology transfers. As a result, light vehicle sales (and production) have ballooned since the start of the 1995-2000 period, to reach 462,000 units in 2002," Armstrong said.

In 2003-04, Iran is expected to open up the market of international investments in the automobile sector. While the production, exports, and imports are projected to rise in the years ahead, but the market is expected to remain regulated with only a small portion of total demand coming from imported models. "Car makers wishing to exploit the potential growth in Iran have to invest there. By 2008, sales are projected to be over 900,000 units,” Armstrong added.