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UAE's Automotive Sector and the Regional Perspective

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UAE's Automotive Sector and the Regional Perspective Investment Opportunities in Automotive Sector in RAK -A Sector Study on Automotive Sector in UAE with Regional Perspective Photograph: Ashok Leyland’s Bus Assembly plant in RAKIA Industrial Park in Ras Al Khaimah (UAE) December 2009 Contents Executive Summary 3 Introduction The Changing Nature of Global Manufacturing 6 The Changing Nature of Supply Chain 8 Global Automotive Production & Major Players 10 Automotive Production in the Middle East 12 GCC Automotive Sector GCC Economic Outlook-Macro-economic Indicators 13 GCC Macro-economic Indicators 13 References….. GCC Auto Industry SWOT 15 Outlook for GCC Automotive Sector 16 1. Hiromi Oki, “Where intra- GCC Competitive edge 17 regional trade in East Asia is Vehicle Assembly in GCC 19 heading”, JETRO Research Paper GCC Source of imports 19 Vol. 06, 2008, 2. Changing Features of the GCC Highlights-Foreign trade in Automotive sector 21 Automobile Industry in Asia - UAE Automotive Sector Asia-Pacific Research and UAE Auto Industry SWOT 22 Training Network on Trade UAE Economic SWOT 23 Working Paper Series, No. 37, UAE Business Environment SWOT 23 July 2007 3. Dubai Chamber of Commerce UAE Automotive Sector trade 24 Economic Bulletin, vol-4, issue- Automotive Manufacturing in UAE 31 35, May 2007 Low cost and Luxury car market in UAE 33 4. OICA Statistics on global motor Used Car Market in UAE 35 vehicles production After- sales Business in UAE 36 5. Trade Statistics-2008, Dubai Port & Customs, Dubai World Car Rental Market in UAE 37 6. BMI report on UAE‟s Auto sector Rationale for setting up projects in RAK 38 2009 Identified Projects 38 7. GOIC report on sector study on UAE Auto Industry Forecast Scenario 54 Automotive Industry in GCC 2009 Automotive Products & Free Trade Agreements 56 8. Dubai Chamber of Commerce About Ras Al Khaimah 57 Economic Bulletin, vol-4, issue- About RAK Investment Authority 59 35, May 2007 References 64 9. Dow Jones Factiva database of Annexure compaies. World Motor Vehicle Production By Country And Type In 2008 65 I Websites: II World Ranking of Vehicle Manufacturers In 2008 66 http://www.researchandmarkets.com III UAE Imports & Re-exports of Vehicles in value term 67 /reports/ IV List of Automobile Component Manufacturers in GCC 68 http://www.worldbank.org V-A UAE Trade figures on components 2006-1008 In value term 70 http://www.unido.org http://www.gulfnews.org 71 V-B UAE Trade figures on components 2006-1008 In Numbers http://www.khaleejtimes.org VI-A UAE Trade on Tyre & Tyre Products-2008 72 VI-B UAE Trade on Tyre & Tyre Products-2007 73 VII Key Global Tyre Manufacturers Contact Details 74 VIII UAE Trade on Vehicle Battery (Accumulators)-2006-2008 75 IX UAE Trade on Electrical Ignition System-2006-2008 76 X List of UAE car dealers 77 2 Executive Summary As automobile industry is becoming more and more Highlights… standardized, the level of competition is increasing and production base of most of auto-giant companies are being Global shifted from the developed countries to emerging markets The share of developing countries in global exports of in developing countries, to take the advantage of low cost passenger motor vehicles increased from 11 per cent in of production. Thus, many developing countries are 1999 to 18 per cent in 2006. making serious efforts to grab these opportunities. The Global production of passenger cars and commercial share of developing countries in global exports of vehicles grew at a rate of 4to 5% between 2002 and passenger motor vehicles increased from 11 per cent in 2007. 1999 to 18 per cent in 2006. Emerging markets will In 2007 the world production of automotives reached contribute about two thirds of the growth in global light 73.27 million units vehicle assembly between 2006 and 2014. In 2008 the production fell by -3.7% due to global recession. Out of this 75% was car and balance State of the Global Automotive Industry commercial vehicle About 69% of the total production was limited to top 10 companies. In the Middle East, Iran and Egypt are the two main producers of automotives. Approx.1.1 million units were produced in 2007 at a CAGR of 12.4%. Highlights… GCC There is no significant manufacturing of Vehicles. Manufacturing is limited to a few assembly lines for bus and trucks. Saudi Arabia and the United Arab Emirates (UAE) are the two high- consumption markets within The supply chain of auto industry has completely changed GCC over the years. Major OEM (original equipment 4-5ml passenger cars in the GCC, out of which manufacturer) players world-wide are increasingly 1.4million are in UAE focusing on basic design and assembly operations as well UAE constitutes about 30% (2007) of the total as servicing the after-sales market and prefer to deal with a GCC‟s demand. smaller number of large suppliers. Consequently, the No significant manufacturing of vehicles except some supply chain is morphing into sub-system integrators, assembly lines. component makers, and commodity players. In 2008 GCC imported 1.2 ml vehicles. About 80% constitutes passenger car and rest trucks & buses. With the gradual opening up of the component sector, now The growth in terms of value of imports of vehicles in the challenge is for individual governments to support the GCC was @ 22% with $24.14bl of imports in 2007. Japanese automobiles dominate the GCC auto market development of domestic critical component and sub- with 60.98%, while the rest of the pie was shared by system suppliers through, interalia, improvement in the Korean brands at 13.78%, American brands at 10.15%, investment environment, stronger patent regimes and and European brands at 8.20%. incentives for R&D. There is no significant manufacturing of components. A few small scale manufactures are the active and Free trade agreements can have important implications catering to the requirements of aftermarket. for the automotive sector because of the improved access The value of import of new tyres has gone up from (addressing both tariff and non-tariff barriers) which they USD 817 million in 2003 to USD 1.3 billion in 2007 can provide and because of the reduction in tariffs which (CAGR 12%). 3 can occur under them. Modern agreements typically also cover a wide range of issues other than tariffs and these can be relevant to trade in automotive products or services. Global production of passenger cars and commercial vehicles grew at a rate of 4 to 5% between 2002 and 2007. In 2007 the world production of automotives reached 73.27 GCC million units. In 2008 however, the production fell by - . Import of auto components too have shown a 3.7% due to global recession to 70.53 million consisting of healthy double digit growth. Main components 52.6 million (75%) cars and 17.9 million (25%) are: tyres, mounted brake components, gear commercial vehicles. boxes, drive axle, components, mufflers and exhausts, automotive spring (leaf and About 69% of the total production was limited to top 10 helical),glass, lead acid batteries and companies. This level of output was equivalent to USD accessories such as car radios and air 2.8 trillion. It employed over 8 million workforce directly conditioners. The individual import figures of and five times as much indirectly. Thus nearly 50 million major items have been given in the report. workforce depend on auto industry for their livelihood. Middle East in general and Gulf Cooperation Highlights… Council (GCC) in particular is a fast growing market for automotive industry. The region has a high ratio of cars United Arab Emirates (UAE) per household. GCC countries with their high GDP is a high consumption vehicle market and present enormous There is no significant manufacturing of vehicles. untapped opportunities for the manufacture of vehicles Manufacturing is limited to a few assembly lines and its components. The combination of relatively high for bus and trucks. living standards, a growing population in the region, as In 2008 total imports in the automotive sector in well as favourable oil prices, have been the key driving UAE was approx. $16.9bl. of which 77% was forces behind the growth in the auto sector in the region. imports and balance re-exports. As regards the Despite an expected slowdown in auto sales during 2008- 2008 distribution of total trade within this sector 2009, the outlook based on resurgence in consumer by activity, motor vehicles accounted for 68%, demand on the back of a pick-up in the global economy followed by auto component 24% and tyre was is likely to lead to robust growth in 2010 and beyond. 8% respectively. UAE trade of component and accessories in 2008 Whilst the GCC (Consisting of UAE, Saudi Arab, were $2.8bl out of which 29% was re-exported. Kuwait, Oman, Qatar and Bahrain) does not possess a The major source of imports being Japan, sizable domestic automobile manufacturing, its high Germany, USA and China The top destinations national wealth has created a niche market for sales of (Re-exports) of motor vehicle parts and imported vehicles in recent years, and there is a large re- components are Iran, Russia, Iraq, Libya and export trade based on the country‟s regional status as a Tanzania respectively. key strategic location, With almost 4m passenger cars in the GCC, out of which 1.4million are in UAE; this region The major items of imports are Bumpers & parts, offers opportunities for car parts and accessories Suspension shock-absorbers, Parts & accessories distributors, retailers and the aftermarket industry, in for bodies, Clutches & parts, Brakes and servo- general, a huge opportunity to enter a market least brakes, Road wheels & parts & accessories and affected by the current credit crunch.
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