Industry Trend Analysis - Growth Headwinds Prompt Downward Sales Revision - NOV 2017

BMI View: We have revised down our forecast s for new vehicle sales in the UAE in 2017 and 2018 . This is due to a recent rise in job losses, a forecast slowing in economic growth and rising prices for households in terms of basic goods and services as well as the costs of borrowing. As a result, passenger car sales will underperform compared to commercial vehicles in 2017 and 2018.

This quarter we have again revised down our new vehicle sales forecasts for the UAE. We are now forecasting a 19.6% decline in new sales in 2017, with commercial vehicle (CV) sales (-8.2%) to outperform passenger car sales (-22%). The passenger car sector will continue to be the heaviest drag on the new vehicle market as we move into 2018 due to increased job losses, weaker economic growth and rising pressures on household finances from fiscal budget cuts, the introduction of taxes and rising interest rates. In contrast, the CV sector will benefit from rising demand for trucks and other vehicles used by the growing construction industry and the still-healthy road freight sector.

Over the year to date in 2017 anecdotal evidence from local media suggests that consumers remain unwilling to spend money on a new car. According to information from the BestSellingCarsBlog website, new vehicle sales fell by 19% year-on-year (y-o-y) in H117, to just 132,261 units. According to local media sources, a series of job losses across both the banking and energy sectors earlier in 2017 is partly responsible for the fall in demand for new vehicles, with consumer confidence also remaining weak. With this in mind, as well as our Country Risk team's recent decision to cut its 2017 GDP growth forecast for UAE to 2.2% (from 2.8% previously), we believe that the near-term outlook for the auto sector remains challenging.

Negligible Recovery in 2018 After Drops In 2017
UAE - Vehicle Sales Forecast, Units & % chg y-o-y
e/f = BMI estimate/forecast. Source: Industry Sources, BMI

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