Revenue Growth and Consumer Awareness
In reference to a report entitled “UAE Automotive Aftermarket Service Industry Outlook to 2026” written in June 2022, an overview of the four wheeler aftermarket service will be highlighted along with some numbers and growth percentage on the industry’s future. Based on the revenue between 2016 and 2021, the industry in UAE recorded a CAGR (compound annual growth rate) of 2.5%. Currently, the industry is experiencing a stagnant growth phase. However, there is an increase in consumer awareness concerning repairing and seeking a proper maintenance of vehicles. The market growth for long-distance vehicles is expected to boost upwards as there is a growing demand towards it. Thus, the market growth can get inclined towards the automobile industry due to its rapid expansion, and the increased focus on boosting the vehicle performance. Adding to that, the extreme use of online platforms by the market players created profitable opportunities for growth in the UAE automotive aftermarket industry.
Market Drivers and Growth Factors
Onto a report about UAE automotive aftermarket drivers done by GMI Research, a market research and consulting firm. There are major factors affecting the UAE automotive aftermarket, and it’s because of the rise in the sales of new vehicles, in population, and the investments in infrastructure along with other factors. According to the report, sales of new vehicles rapidly increased in the UAE in 2022, and it indicates a 2% increase from 2021. As a result of this increase, vehicles in operation will increase, which will cause a demand increase for automotive replacement parts like tires, battery, and filter. In addition, what fuels the growth of the automotive industry in the UAE is the strong growth in the UAE economy, rising household spending, and the growing second-hand auto spare part markets. According to the report published by the International Monetary Fund, due to the rise of global crude oil prices, the overall GDP of UAE was projected to grow more than 6% in 2022. Moreover, there is an event called “The World Expo”, and it’s one of the oldest and largest global events which takes place every 5 years. Dubai welcomed over 24 million vistors in 2022, which was supposed to be held in 2020 but got postponed due to COVID-19. Thus, the on-going infrastructure development to host the Expo along with the country’s increasing population and growing GDP per capita further reinforced the demand, which will then lead to stimulate the UAE’s automotive aftermarket industry growth.
Boosting Demand and Growth Opportunities
Digging deeper, there are other factors that can result in boosting the demand of the market such as the high disposable income that motivates consumers to upgrade their cars more often as the demand for luxury equipment and devices tend to increase. Adding to that, modern infrastracture in the UAE and the low cost of fuel made the automotive sector an attractive sector to invest in. The UAE government has an important role in this increased GDP and enhanced economy. It is taking inititavies to reduce its reliance on oil and gas; instead, it focuses on other sectors like tourism, education, and healthcare. As per the National Tourism Strategy, it’s expected that the UAE government will invest around USD 27 billion in tourism in order to attract 40 million visitors by 2031 as the tourism sector contributed previously in 2019 to approximately 11.6% to the total GDP. With those factors, increasing investments in the tourism sector by the government, demand for new vehicles and the expected increase in taxi services will create booming growth opportunities for the automotive aftermarket of UAE.
Revenue and Forecasted Revenues
Automechanika Dubai, the well known exhibition, published an extensive report in 2021 entitled “The GCC automotive aftermarket Post-Covid-19”, and what will be highlighted in this part is the revenue of the aftermarket made in the years after covid as we as the forecasted revenues in the upcoming years. In reference to figure (1), the cumulative retail revenue of parts in the GCC (Gulf Cooperation Council) was around $5.6 billion in 2020 and $5.26 billion in 2020. KSA ranked the first in contribution as the overall revenue in 2020 was $2.57 billion, and it is expected to be on the top of the GCC market up to 2025. The UAE followed with $1.18 billion in 2020, and it is expected to grow at a 7.7% CAGR from 2021 to 2025, and this is because of the ongoing Expo 2021-2022. For Qatar, it is expected that millions of tourists will be attracted to visit Qatar due to the 2022 FIFA World Cup, which will boost Qatar’s economy and increase the demand of the automotive market. You can also check the detailed percentages of the aftermarket parts sales revenue in figure (2).