GCC set to see increased preference for used cars
Auto sector set for big changes post-COVID-19, with new business models likely to emerge
The COVID-19 pandemic and the associated movement restrictions imposed by authorities have already reshaped the way business is done across the world. As a large percentage of the population is sheltering in place, e-commerce transactions have understandably seen a spike. This global trend has already started having an impact on the GCC’s automotive and mobility sector, and is likely to force major long-term changes in business models in the region.
Lockdown measures and changes in customer preferences have already led to service providers in the maintenance and aftermarket sectors adapting quickly to the changes. “Customer preferences are changing,” said Subhash Joshi, Middle East Director of Mobility and Regional Head for Frost & Sullivan. “Vehicle maintenance trends are becoming more convenience oriented and customers are now more inclined to avail of services at their home or at their workplace, rather than invest time in a service centre. We expect on-demand and on-call mechanic services, which are being piloted in the UAE, Saudi Arabia and Oman, to become mainstream services,” Joshi added, speaking at a webinar hosted by Messe Frankfurt Middle East for Automechanika Dubai, on the ‘Impact of COVID-19 on GCC's Automotive Aftermarket’.
Joshi also pointed out that on the aftermarket sector, the period between March and April saw a spike in online sales of brake parts and accessories. He said penetration of e-retailing of spare parts, which was less than three per cent, is already at five to seven per cent in 2020. “We expect this trend to remain as online accessibility for accessories, spare parts, brakes and batteries are launched,” Joshi added.
But one of the most important changes brought about by the pandemic is the sales of used cars outpacing that of new vehicles. “As people are being financially cautious and overall consumer confidence remains low, consumers will defer major purchases of new vehicles,” said Vishal Pandey, Director at Glasgow Consulting Group. “An increased willingness of people trying to use old cars has also created an opportunity for the aftermarket component and sales to grow,” Pandey added.
According to experts, the average life span of vehicles in the GCC has increased from 7.4 to 7.5 years to 8.1 to 8.2 years, which results in a rise on average spend on maintenance due to the average age of vehicle and mileage, offering a positive for the automotive aftermarket.
“The ratio of used car sales in 2014 and 2015 in the GCC was about 0.8 for every new car. In 2019, the UAE was almost equal to the UK which averaged 3.5 used cars for every new car sold,” Subash Joshi added, pointing out how an increase in online platforms for used car sales will further strengthen the market. “Penetration of e-retailing of new cars, which used to be 0.25 per cent, has already increased to approximately two to three per cent. Between January and March this year, used car transactions on online platforms have already recorded an 8.5 per cent increase. Therefore, how the customer journey is to be defined will greatly impact on the GCC region.”
Source: Sony Thomas / Wheels Editor
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