Picture from Hasbro
In his excellent blog, the Emirates Economist, John P Chilton yesterday commented on a report he had seen in The Peninsula newspaper in Qatar about the government there looking at the possibility of lifting competition barriers within the automotive industry.
While we can’t comment about Qatar, where the situation is very different, we have always had some conflicting thoughts about these auto-monopolies in the UAE.
Some dealerships operate across the entire UAE, such as Al Futtaim Motors, while others are split between Abu Dhabi and Dubai and the northern emirates – take Ford with National Motors in the south and Al Tayer Motors elsewhere.
On the whole, they have handled sales for their respective marques for generations and are identified as one and the same with their brands at a consumer level. Each dealership is generally part of a wider trading company, part of the old UAE merchant families.
There are positive and negative aspects to the way this business is conducted. For example, were it not for Al Masaood (Abudullah Al Masaood once told us in an interview), the Nissan Patrol would have gone out of production about four years ago, before the latest generation had been developed. Al Masaood stepped in because the model had become so popular in Abu Dhabi – it is one of the favourites of the ruling family there – and it was financially worthwhile for the company to find a way of preventing it from being discontinued.
“We told Nissan that we wanted to buy the old factory in Japan to ensure that the Patrol stayed in production, so important was the car for us,” Al Masaood said. “So they reconsidered. A lot of enthusiasts attribute the return of this hero to Al Masaood Automobiles.”
This clearly shows the direct link between dealership and manufacturer through a system like this. While many manufacturers have local offices as a liaison between, say, Tokyo or Detroit and the UAE, Toyota leaves Al Futtaim in direct control of its imports and domestic affairs, which works well. The Dubai company has such close ties and involved experience with Toyota that it knows more about the market than any “man on the ground” ever could.
There are, of course, some negatives that come with the way things are done here. For example and speaking generally, UAE dealerships have traditionally provided a poor customer experience and only until recently have they invested in the second-hand sales side of the business.
For years, many manufacturers have complained about their inability to get through to their distributor about the importance of providing excellent service before, during and after a sale, and not through want of trying.
The recession, however, has been improving this state of affairs, with dealerships realising they have to keep their eye on the ball and give customers what they want these days; cars no longer walk off the forecourt the way they did before 2008. Sadly, this is not across the board and some distributors still have poor reputations, to the chagrin of their manufacturers.
Audi Middle East has been at the fore of improving service through Al Naboodah, its distributor. When we interviewed him for The National (somehow the story seems to have dropped offline, but some kind soul has the page PDF), Audi’s regional managing director, Jeff Mannering, outlined how “customer delight” was now his top priority.
“We don’t necessarily want to sell the most cars. Sure, some of our competitors sell a lot but one of the things here in the Middle East that makes a difference is delighting your customers. I believe there is a whole lot of people out here who aren’t loyal to brands, and if you can really focus on your customer and really build your brand awareness, and have a strong desire to get there, we can do it.”
This is an example of the manufacturer and distributor working in partnership. However, privately, many manufacturers still complain of their struggle.
In terms of cost, it is unlikely the consumer will benefit much from competition in the UAE. Prices seem fair here, unlike what appears to be the case in Qatar.
So would we benefit from greater competition? We don’t think so – as long as the manufacturer is in control as it is today. If you had asked us before the crash, we would have been all for change because sales was king and the dealers would take as many cars as could be shipped, knowing they could quickly replace their stock.
This shows the short-term nature of the industry, but hopefully after this first real shock, long-term infrastructure is being put in place to satisfy customers even within a monopoly.
