A major market in the region
The United Arab Emirates (UAE) economy is on the upswing. According to forecasts, 2024 will see a substantial growth of 4.0 per cent, and 5.1 per cent in 2025 – driven by an expected increase in oil production and expansion in other strong economic sectors. Despite the context of global economic uncertainty, the UAE continue to lead the Gulf Cooperation Council (GCC) region, benefiting from strategic diversification efforts with substantial investment in tourism and industrial capacity. The automotive industry plays an important role here. Along with Qatar and Kuwait, the UAE have one of the highest car ownership rates in the region. Currently, there are 3.5 million cars on the roads in this country of 10.6 million inhabitants and major urban centres, with 1.8 million in the high-tech metropolis Dubai alone. With a per capita gross domestic product of 52,000 US dollars, the population has a high purchasing power, roughly equivalent to that of Germany. Japanese manufacturers are the dominant force in the mid-range market. In the premium segment, SUVs and sedans are particularly popular. As a result of government initiatives to promote sustainable mobility, hybrid and electric vehicles are beginning to play a more important role as well.
Number of new registrations on the rise
Also in the UAE, the automotive market in the UAE experienced a period of weakness due to the coronavirus pandemic. However, the market is has bounced back and is exhibiting robust growth. The number of new registrations has been rising steadily since 2021. With almost 260,000 new drivers in 2023, registrations exceeded pre-coronavirus numbers, marking the end of the crisis. The UAE's overall positive economic development and tax incentives are driving new car sales. This includes a growth in the market of luxury and electric cars.
The most popular brands in the UAE are Toyota, Nissan, and Mitsubishi. Grouped together, they account for a market share of 50 per cent. These Japanese models offer comparatively low purchase prices, service packages, and a reliable supply of spare parts. There is a remarkably strong demand in the SUV and luxury brand segment, which accounts for more than half of all new car purchases. These all-terrain vehicles are primarily driven in urban centres, but buyers perceive them as safe and comfortable, and know they are suited for traversing desert routes if necessary.
“There are three main reasons for the popularity of Japanese car manufacturers: Firstly, the total cost of ownership of these vehicles is much less compared to other brands, secondly, spare parts are easily available at a reasonable price and thirdly, Japanese brands have earned customers’ trust as reliable vehicles over time. However, we’re currently seeing some shifts in the market due the fast entry of Chinese OEMs; as of now, only European and American makes have been affected. Over the coming years we will see if the Japanese models will maintain their lead.”
Strongest growth for SUVs and luxury brands
Both Ford and Land Rover have reported a notable increase in sales in the UAE over the course of this year. This is probably mainly due to their strategic adaptation to the market situation: Ford promoted SUVs that are ideal for the desert and has increased its sales by 73 per cent this year. Land Rover stands for durability and status. The British brand has increased its growth by 33 per cent and Land Rover has established its Defender model among the top ten models in the country. Since 2020, both Ford and Land Rover have strengthened their marketing strategy, expanded their dealer network and increased their market presence.
The top dogs continue to come from Japan, among them this year’s best-selling model, the Nissan Sunny. Its affordable price point makes it an attractive option for both individuals and fleet operators. The Toyota Hilux and Nissan Patrol are pursuing in second and third place, respectively, and are highly regarded for their reliability. German brands such as Mercedes-Benz, BMW and Audi are also very popular in the UAE, and are synonymous with luxury, prestige and technical innovation.
Open to the electric future
Electric mobility is an important issue in the UAE: sales of electric cars have been rising steadily since 2017, with Dubai accounting for around 90 per cent of new registrations. The government is supporting the change with sustainable transport policies, funding programmes and by adding sustainable vehicles to the public fleet. As an example, 20 per cent of all government vehicles are already electric. The aim is to have a 10 per cent share of electric and hybrid cars on UAE roads by 2030, and 50 per cent by 2050. The government is providing incentives such as free new registrations, free parking for EVs, and free charging stations to meet these aims.
A dominant position in the UAE e-mobility market is being held by Tesla, with a market share of over 60 per cent. It is followed by Porsche, Volvo, Mercedes-Benz, and Audi. Tesla has benefited from its pioneering role in the field and is still regarded as an innovation leader. German carmakers are also often favoured for their design. There is a rise in the importance of Chinese companies such as Nio, Xpeng, and Zeekr, which often form strategic partnerships with local companies to strengthen their presence. These Chinese manufacturers also build distribution networks in the UAE through partnerships with companies such as Ali & Sons and AW Rostamani Holding.
The UAE as a global innovation laboratory
Dubai has become an innovation laboratory for future mobility. The government is encouraging R&D investment in the automotive sector as part of its long-term strategy for the region. One star project is Dubai Industrial City (DIC), one of the largest industrial parks in the region. Opened in 2004, DIC is a hub for innovative technologies and sustainable industrial development, where forward-thinking companies in the automotive, logistics, renewable energy, and smart cities sectors can set up shop. And also in terms of public transport, this metropolis is spearheading development in the Middle East, with the public transport market share rising from 6 per cent in 2006 to 26 per cent in 2022, with 1.8 million daily users. Forward-looking investments are being made in the expansion of the 5G network, as well as electrification, automated driving, and car sharing, which is particularly popular with Gen Z. By 2030, the emirate plans to have 4,000 autonomous taxis and automate 25 per cent of transport. Dubai's traffic authority RTA is partnering with Cruise, a subsidiary of General Motors, while Abu Dhabi is planning to have robo taxis by Uber and WeRide cruising the capital by the end of this year. Air taxis are also planned: the RTA is collaborating with the company Joby Aviation, which plans to take off as early as 2025.
“In line with global sustainability goals, the UAE is integrating climate change considerations into its mobility policies. UAE is in the forefront of adopting smart mobility involving a variety of technologies and services designed to enhance transportation efficiency with Dubai overall being the market leader and innovator in the GCC region when bringing in new ideas that drive economy and tourism. The Roads and Transport Authority (RTA) in Dubai plans to introduce autonomous air taxis and self-driving police vehicles as part of its vision for future transportation solutions.”
Vishal Pandey, director at Glasgow Research & Consulting
