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Why UAE residents are buying more used cars

Dubai - Demand for pre-owned vehicles has grown up to 15 per cent.

Demand for used cars in the UAE has moved to the fast lane in 2021, growing up to 15 per cent.

Weaker economic sentiment is prompting UAE residents to opt for more affordable vehicles; an increasing number of motorists tend to travel in their vehicles during the pandemic as well.

Local automobile industry executives said high digital penetration and strong countermeasures taken by the government to stimulate the economy are also driving high demand, resulting in a lack of availability of cars in the pre-owned segment.

"The used car market growth rate is between 10 to 15 per cent. We are witnessing a good demand in the domestic market and export sales channel as well. The issue for the moment is the lack of available cars in the market that makes it difficult to serve the increasing demand," says Axel Dreyer, chief executive officer for Automotive Division at Galadari Automobiles Co. Ltd.

He said the UAE government's effective countermeasures to stimulate the economy contributed to a good recovery and connected demand for mobility of existing and new residents in the UAE.

"Especially new residents are looking for an economic vehicle that will serve their transportation requirements."

Abhinav Gupta, CEO for Gulf Region at Cars24, reports double-digit growth in used car sales. These were driven by the opening up of the economy, Expo 2020 Dubai, increased online buying due to high digital penetration and weaker economic sentiment related to jobs security.

"The market was stagnant at 700,00 to 800,000 units for a few years. But the way the market has recovered and the government managed the lockdown, we see UAE ahead of the curve than most of the markets. Over the next 2-3 years, this market should cross the one million mark," added Gupta.

Launched in April 2021, the online car platform has grown to the second-largest car seller and is all set to become the largest in one or two months, Cars24 CEO said.

Gupta added that they sold around 350 units in July, and he expects to sell over 500 in August. For the full year, Cars24 expects to sell 3,000-3,500 units.

What is driving demand?

Gupta noted that the weaker economic sentiment about losing jobs, salary cuts and not getting increments alongside a sense of safer and more viable mobility options among motorists are driving the demand for pre-owned vehicles. A shift from cab users to privately-owned cars adds to the trend.

He said at least 30 per cent of users responded that they want to shift from cab to privately-owned cars due to Covid-19 safety considerations.

There has also been additional demand for pre-owned cars for family or personal use among residents, adding that the partial disruption of the new car segment alongside value-for-money has also driven the market into a double-digit growth matric.

What kind of used cars do residents prefer?

Axel Dreyer said the smaller cars segment is in high demand, and there is always a customer waiting when it comes to compact sport utility vehicles (SUVs).

He said: "The customer is focusing on a reliable car with service history and warranty that will ensure him a hassle-free usage for a certain period of time. Therefore, the customer is preferring to route his purchase through agencies and well-established dealers."

Abhinav Gupta of Cars24 said the UAE market still loves Japanese and Korean brands. The two dominate the market and their market share is only growing.

"Another important trend we have noticed is that demand for SUV has grown much higher than pre-Covid-19 levels, but sedan remains the preferred choice for a more affordable segment which is below Dh50,000. Around 40 per cent of the market remains under the Dh50,000 budget, but the Dh50,000 to Dh100,000 segment has grown and now accounts for 30 per cent shared and it is powered more by the SUV demand," said Gupta.

He said used car prices within the Dh50,000 to Dh100,000 bracket have increased by 20 to 25 per cent; the segment has increased from 20 to 25 per cent to 30 per cent.