Sales of greener vehicles in Dubai look set to rise in the coming years as the government steps up its bid to reduce the emirate’s carbon footprint.
The introduction of quotas for hybrid cars in government vehicle fleets, combined with campaigns aimed at encouraging Dubai’s motorists to switch to environmentally friendly automobiles, is expected to open up new markets for the industry.
More broadly, auto sales should also receive a boost from the positive economic forecasts in the UAE budget, which put GDP growth at around 3.6% in the coming year, up from an estimated 3.3% in 2016. The luxury vehicle segment, in particular, looks set to deliver another solid performance.
Going greener
With a target of cutting emissions by 16% by the end of the decade looming, Dubai’s government is accelerating its plans to boost the number of vehicles in public service that make use of new technology.
Announcing its campaign in mid-July, the government said that by 2020 at least 10% of vehicles in its larger fleets would be hybrid or electric models. Officials will be hoping that national efforts to lead by example will encourage the private sector to follow suit.
A separate plan under consideration by the Road Transport Authority (RTA) aims to bring the number of hybrid taxis on Dubai’s roads to 4750, or 50% of the total fleet, by 2021. At present, just under 150 of the taxis on Dubai’s roads are hybrid.
The RTA is especially keen to utilise electric vehicles for public transport as part of its campaign to reduce carbon emissions.
In mid-November Ahmad Hashem Behroozian, CEO of the RTA’s Licensing Agency, said the authority was also considering introducing hydrogen-powered cars into the emirate’s taxi fleet. His comments followed the launch in Dubai of the Toyota Mirai, which uses hydrogen cell technology.
As well as raising the number of hybrid engine government vehicles and taxis on the road, some market stakeholders believe that tax incentives could also boost sales in the segment. “When some markets in the EU introduced tax incentives for hybrids, sales increased up to 12-fold,” Mark De Haes, president of Daimler Middle East and Levant, told OBG. “Similar incentives would do much to boost the market for hybrids in Dubai.”
State utilities provider, the Dubai Electricity and Water Authority, is playing a supporting role in the emirate’s move towards greener motoring, having been tasked with installing charging stations for electric vehicles.
More than 100 stations are already up and running under the government’s Green Charger initiative, with additional facilities set to extend access across the emirate.
Power still a pull
While the alternative power segment has potential, the appeal of standard models – including luxury cars – remains strong, buoyed by both low running costs and cultural preferences.
“This is still a car culture that favours traditional engine types,” Ahmed Al Habtoor, CEO of Al Habtoor Motors, told OBG.
Indeed, petrol prices in Dubai are still well below global averages, despite tariff increases. According to the UAE Ministry of Energy, petrol prices for January 2017 will be Dh1.94 ($0.53) per litre for diesel, compared to a global average of $0.86 per litre as of the end of 2016.
However, some industry players, including Graham Turner, CEO of Al Ghandi Auto Group, are beginning to spot changes in consumer preferences, with technological advances helping to galvanise new trends.
“While the UAE is a market that has historically favoured five- and six-litre engines, there has been a recent shift downwards, as technology has made smaller-sized engines more powerful,” he told OBG.
Luxury segment going strong
Although sales across some segments of the market have slipped on the back of slower growth in 2016, key niche markets are continuing to deliver solid performances. Sales of high-end SUVs and sports cars have remained strong throughout the year, with any downshift in demand negligible, according to Al Habtoor.
“We have seen very little impact in terms of demand for high-end vehicles,” he said. “McLaren sales, for instance, have increased 15-20%.”
His comments were echoed by other industry players, including Johannes Siebert, managing director of BMW Group Middle East. “The premium segment has outperformed the non-premium segment over the past year,” he told OBG. “The former saw a decline of 13%, whereas the latter saw closer to 22%, as people remain willing to pay for quality.”
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