In conversation with Sreejith Ajith, Team Lead, at Cars24, we have attempted to identify the growth drivers, trends, current situation and future potential of Used Car Market in UAE.
“Used Car Market in UAE consists of a lot of small players and few major players operating through dealerships and online platforms. The market is experiencing a shift in consumer preferences towards EV and Hybrid Vehicles with Chinese Brands like MG in higher demand.”
1. Would you like to state some names of the major players operating in the UAE Used Car Market alongside Cars24?
There is a company by the name of Automall which is a homegrown company but very old. There is another company by the name of Kavak, this one is Mexican origin company and recently entered into Middle East and are now doing good business. There platform is exactly like Cars24. Al Futtaim Automall is also a multi brand outlet much like Cars24 and Kavak and have their website as well as a dealership setup, it is also into selling new cars and operates across various brands like Toyota, Jeep etc. These 3 are major competitors. There are many small players as well like Alba Cars, Prince Motors, Elite Motors and other way too many players.
These players deal in specific category of cars for example, Elite Motors deals only in luxury cars like Rolls Royce, Bentley, Ferrari etc. Advantage Motors deals with normal passenger cars.
2. What kind of cars do Cars24 deals with?
Cars24 only deals with normal passenger cars, no luxury cars as such. The value of the car will be less than AED 400,000. We don’t deal with Rolls Royce, Bentley etc.
3. What is the average price of a used car sold on online platforms and dealerships like Cars24?
Average price for most of the passenger cars would be in the range of AED 100,000 to 120,000. During the COVID-19, the price was lesser about AED 80,000-85,000. After that, prices increased as demand for SUVs and other vehicles increased. In future, the price is expected to little bit in the future but not a major change in pricing. As trend shifts towards EV cars, prices may further increase in the future.
4. How exactly do classified platforms operate in the market?
Players like YallaMotor, Dubizzle etc. who do not directly engage in selling of used cars but acts as a listing platform. Dubizzle is like the benchmark for classifieds in UAE. There is also Car Switch, Dubi Cars, Open Souq and more. They only deal with advertising of used cars unlike Cars24 or Automall who owns the cars which they are selling. It takes about 2 days to complete purchase a car, in case there is no mortgage on the car. The only delay is from customer end.
5. What is the process that goes behind selling a used car in UAE?
First, we go to the customer, we inspect the car for its quality and then we offer a price along with an agreement consisting of all the details. If customer is fine with it, he will sign the agreement and share it with us. The next step is to meet the customer at RTA and do testing of the car under the criteria set by RTA. If the car passes all the conditions, we will sign the form and car will be in our name. After that the finance team will process the payment.
6. What are some of the conditions set by RTA for a used car?
The RTA has a set of comprehensive standards that a car must meet when being transferred. These standards encompass various aspects, including the condition of the tires and brakes, pollution levels, accident history, and the overall state of the vehicle. It's important to note that these standards apply to cars of any age and place emphasis on safety concerns.
7. What brand of the used car is most preferred in UAE?
It depends on the market trend. At present, there is a brand by the name of MG which is selling in good numbers as it is cheap and is full of technology. Then, there is Toyota and Nissan obviously. I would keep Toyota at the top but MG is also doing good numbers as it offers good feature for the price.
8. What is the average margin earned by different players in used car market in UAE?
If the car is about AED 100,000. The average margin that we desire would be in the range of 12-15%. But usually if the car is in excellent condition with all formalities done, we can also move forward at 10% margin.
9. Could you share some thoughts on the role of dealerships and financing in the UAE Used Car Market?
Dealerships play a vital role, offering assurance of quality and proper documentation. Desired profit margins of 12-15% are typically achieved when the vehicle's quality and documentation are top-notch. As for financing, interest rates for loans range from 3-5% per month, and loan durations are determined by the car's age. Vehicles manufactured in 2016 and above may have 5-year loan terms, while those below 2014 might have shorter terms or no loans at all.
10. Which type of car is most preferred in UAE?
SUV is definitely the most preferred one. As right now its summers but once its winters, many families go for picnics, vacations etc. At that time the sales of SUVs will increase. Sedans are generally used by a person to do up and down from work and office. Sedans and hatchbacks come at 2nd and 3rd. SUVs generally takes up 40-50% of the market then sedans are at 30%.
11. What is the used to new car ratio currently in UAE?
There is for one new car, there are about 4 enquiries coming in for a used car. The ratio is currently higher than pre-COVID period as rental cars were in higher demand as compared to used cars. Right now, people prefer used cars over rental cars as it is more economical. People are also scared of using a car used by multiple persons like in case of rentals. Hence, they wanted their own personal cars. The price for rentals also increased like for Nissan Sunny, it increased from AED 1200 for a month in 2017 to AED 1800-2000 currently. Hence, it becomes better to buy a used Nissan Sunny, use it for few cars and then resell it at a good value.
12. What is usually the depreciation rate on used cars in UAE?
Chinese brands like BYD or MG have a very high depreciation which would be 20% in the first year and then around 15% depreciation every year. For Toyota or Japanese cars, they have lesser depreciation around 10-15% as they are good in demand. SUVs also have about 15%.
13. Can you mention the major OEM players?
OEM player for BMW is AGMC, For Audi, Porsche it is Al Nabooda, For Mercedes we have Gargash. Tesla has its own dealership. Al Futtaim sells Toyota, Honda, Jeep, Volvo and Dodge. Ford, Jaguar, Land Rover is dealt by Al Tayer.
14. What do you think will happen in course of next 5 years?
I feel that people will continue to prefer used cars. This is because there is trend in UAE where people would buy a car use it for a year and then sell it. The trend might shift more towards EV and hybrid cars. Manufacturing of brand-new cars is still at a slow pace and also focus will shift more towards EV cars. This would promote demand for used ICE cars as I think that by 2030, there would be no new ICE vehicle available in the market.
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