This is a best prospect industry sector for this country. Includes a market overview and trade data.
- The UAE’s automotive sector grew approximately 6% in 2019.
- The industry faces entirely new challenges due to the COVID-19 pandemic from supply chain disruptions, reduced consumer spending power, and little or no sales.
- Negative trends will continue through 2020 due to economic uncertainty, overstock of supply by dealers, and an overstock of pre-owned vehicles.
The UAE’s automotive sector has shown remarkable comebacks in the past (2008-15) and experts feel that the country has the resources and appetite to continue to be one of the most robust automotive markets in the GCC due to factors such as low fuel costs, low import tariffs, high per capita disposable income, and a favorable tax regime. Also, attractive insurance and finance options make it relatively easier for consumers to buy cars in the UAE. On top of all these, the pandemic forced several car dealerships in the UAE to start introducing innovative technologies such as online bookings and other digital services, test drives at customers’ residence or workplace, job-loss insurance protection, etc.
The outlook is positively impacted by COVID-19 travel restrictions and the need for social distancing. Consumers now prefer to use their own cars and avoid traveling by public buses and metro.
Over the long term, larger vehicles will remain popular to accommodate large families, and the Detroit Big-3 auto companies excel in this competitive segment, particularly the larger SUV segment. In addition, the UAE government encourages autonomous vehicle technology, research and development into driverless vehicles and other smart, green and environment friendly technologies such as alternative fuel vehicles, including hybrid and hydrogen vehicles. Given high disposable income levels and an interest in classic, modified, and luxury vehicles, demand for specialty performance and appearance products is likely to continue growing. U.S. companies also command a leading position in the supply of transmissions, tuning, high-performance parts and kits, steering, suspension, and brake components and parts to the UAE market.
However, recent supply chain disruptions and the closure of car factories across the world have had an enormous impact on UAE’s automotive sector. The country relies heavily on imports, with virtually the entire supply of passenger and light vehicles being imported. That trend will change, as local production will have to keep pace to avoid such uncertainties to meet local market demands.
Approximately 80% of the UAE automotive market is passenger cars and the remaining 20% is commercial vehicles (trucks, vans, and buses). In 2019, Japanese manufacturers Toyota, Nissan, and Mitsubishi remained the leading sellers of passenger cars in the UAE. Toyota retained its position as the market leader with 30% share, followed by Nissan at 20.6%, and Mitsubishi at 13.2%. The top three brands contributed to 63.8% of total passenger car sales in the UAE in 2019.
With major infrastructure related to the Dubai World Expo project and several other commercial and housing projects, the commercial vehicles sector showed growth in 2019. Also, increased tourism and hospitality activities during 2019 drove demand for bus and minibus vehicles, which saw a surge in sales.
The UAE has limited local production of vehicles. Recently, a few companies setup production in the UAE. These include Ashok Leyland, the flagship company of the Hinduja Group and a major manufacturer of trucks and buses in India, ranked #4 globally as manufacturer of buses and the 14th largest manufacturer of trucks. They commenced production in the UAE in 2010. Hafilat Industries and Capital Manufacturing Car Services is a local UAE company manufacturer of heavy truck mounted bodies and related structures for trailers and passenger buses. Sandstorm Motors, W Motors, and Zarooq Motors started production in the UAE.
To comply with local requirements, all vehicles must conform to the UAE standards and their steering wheels must not be modified. There must be no damage on the vehicle outer body.
The UAE does not allow importation of vehicles that have been subject to accidents such as submerging, fire, collision, rollover, etc. Also, vehicles previously used as taxicabs or by police are not allowed to be imported.
Vehicles may only be exported to companies having commercial registration for business activities in vehicle sale and import and to individuals with a valid residence authorization, if the importer is not a citizen of any of the GCC States.
All cars and buses entering UAE must abide by safety regulations issued by the Emirates Authority for Standardization and Metrology (ESMA). In addition, the following rules must be adhered to:
Head restraints in all seats and air bags for the driver and the front passenger are compulsory for all passenger cars and buses with capacity up to 22 passengers.
Safety belts and Anti Braking System (ABS) are required in all new vehicles. Extra seats in the aisles are prohibited for any motor vehicle with a riding capacity of four people or more every vehicle must have an alarm to notify when drivers exceed speed limit of 120 km/hour in cars and 100 km/hour on buses.
In addition, all vehicles must be exported from the country of manufacture and steering wheels must not be modified. There must be no damages on the outer body and vehicles must be accident free.
- Proof of vehicle ownership and invoice must be attested by the local chamber of commerce in the U.S.
- Export declaration from U.S. Customs.
- The invoice and the certificate of origin must be attached to the export declaration.
- A document issued by the local police in the U.S. indicating that the vehicle is not wanted for any criminal investigation.
Local Standards Requirements
U.S. tire suppliers must ensure that RFID labels are affixed on their tires before entering the UAE. For more information about RFID labels, please see: UAE Tire Labeling Scheme.
Re-Manufactured and Used Auto Parts
Importation of reconditioned/used auto parts is not allowed for sale in the UAE, unless reconditioned by the original manufacturer. The reseller is not allowed to claim that the part is the same as an original part. There is no difference in the treatment between remanufactured and used auto parts. This treatment applies to all motor vehicle parts.
Remanufactured/rebuilt parts are generally considered used or semi-used and are reflected in the pricing. Normally, the warranty period will not be the same as the original, if offered. Used, not remanufactured, parts usually carry no warranty.
Local industry sources believe that there could be potential in this segment as a number of American cars sold within the UAE and a number of used American cars are re-exported to other neighboring countries through the UAE. Rebuilding of parts in the UAE is limited to auto mechanics offering their clients an extra service in their maintenance of cars.
The 5% import duty for new parts also applies to remanufactured or used parts. The use of the company logo as well as the original packing design is not allowed for reconditioned/used parts. As there is a complete difference in packing from the original, advertising costs for resellers of reconditioned/used parts are higher even though the quality of the product is similar. It will not be easy to lend credibility to reconditioned/used parts in this market and a lot of effort would need to be put into the process of establishing a brand.
Truck approvals are conducted at the GCC level by the GCC Standards Organization based in Riyadh. The product should be first approved before the truck can be exported to GCC countries, including the UAE.
U.S. truck manufacturers or exporters may contact the office below for approval:
Conformity Assessment Department
G.C.C Standardization Organization (GSO)
Phone: +966 1 274 66 55 ext. 333; Fax: +966 1 210 53 90
Tariffs: The tariff applied to cars is a 5% customs duty on the value of the vehicle plus 1% insurance plus cost of the shipment. For trucks, the customs duty is 12%.
The tariff for radiators and filters is 12% and 5% for all other spare parts.
Taxes: The UAE government imposed a 5% VAT from January 1, 2018 on vehicles sold in the country.
Barriers: The UAE’s trade policy has been consistent with its obligations under the WTO. There are few trade barriers, viz. automotive parts should not contain asbestos, and products should not have been manufactured or transited through Israel.
The UAE’s Ministry of Energy has stepped up measures to promote electric vehicles (EVs) in order to reduce the carbon footprint and has introduced regulations on electric vehicle charging systems. In addition, ESMA has set standards for imported EVs to address concerns surrounding overheated batteries, operating in extreme heat and humidity, preventing drivers and passengers from the risk of electric shocks, and protecting passengers in case of front and side impacts.
Electric Vehicles entering the UAE market should have a crash test certificate conforming to the safety standards of the international technical regulations and meet the following minimum requirements:
- Adaptability of the batteries to high temperature.
- Protection of drivers and passengers against electric shock.
- Safety of batteries against explosion due to overheating.
- Safety of the vehicles in case of front and side impact.
- Ability to withstand sandstorms and dusty conditions.
Various government entities, such as the Dubai Water and Electricity Authority (DEWA) and Dubai Silicon Oasis Authority (DSOA), have installed EV charging stations in the emirates and the trend is likely to increase in the future. The target is to have 10% of all cars in Dubai as electric or hybrid vehicles by 2030.
In support of the UAE’s initiatives, Electric vehicles are increasingly visible on the roads primarily due to the reduced pricing of cars, and increased awareness and acceptance. Dubai Electricity & Water Authority (DEWA) has waived charging fees for non-commercial users until the end of 2021. Home charging in Dubai, however, is priced at applicable residential rates.
The UAE is the first country in the Middle East and North Africa (MENA) to launch hydrogen cars, in line with the country’s environment-friendly transportation strategy. UAE’s Standardization body ESMA has introduced technical regulations for the import of Hydrogen Cell Vehicles into the UAE. Such vehicles only emit water vapor and need to comply with ESMA regulations.
While a few semi-autonomous self-driving vehicles travel on UAE roads, such as self-parking vehicles, full self-driven cars are not permitted. According to published reports, the UAE Standards Body ESMA is working on regulations for autonomous vehicles.
Dubai recently enacted legislation in line with the Dubai Smart Mobility Strategy to transform 25% of all transportation, including mass transit such as trains, buses, marine transit, and taxis, as well as private vehicles, into self-driving transport by 2030.
To that end, the new legislation invites individuals, private and public entities to connect with Dubai’s Road and Transport Authority (RTA) to sign contracts for undertaking trials of self-driving vehicles in Dubai.
Demand for motorcycles is on the rise in the UAE, both for lower end (used by expatriate workers) and higher end (used by wealthy UAE consumers). Companies like Harley-Davidson, Honda, and Kawasaki have operations in the UAE but other companies like Hero MotoCorp and Royal Enfield (from India) and others are also expanding into the market.
As a regional trading hub, the UAE presents a competitive landscape for American companies in this sector. However, the UAE Ministry of Interior announced that from May 2017 the registration of imported used vehicles would be subject to a conformity letter by ESMA after verifying compliance with the new regulations on import of used vehicles. Many successful U.S. firms already in business in the region rely on technological advantage and quality assurance in addressing demand and facing foreign competition. Also, with an increased emphasis on consumer safety, the UAE government is introducing new regulations for the safety of imported used light vehicles and safety requirement for modified vehicles. More information can be found on the Emirates Authority for Standardization and Metrology website.
Parts and Components
The UAE has become a regional hub for car parts and components for the Middle East and GCC. As a result, the UAE plays a major role in the car parts trade within the Gulf region and has positioned itself as a major re-export center. In addition, the economic slowdown that has resulted in fewer new vehicle purchases could positively impact auto aftermarket sales if vehicles are kept longer. However, the UAE has implemented a new law to regulate imports of automotive spare parts into the country. Accordingly, importation, manufacture, or use of spare parts without a certificate of conformity from ESMA is no longer permitted.
Beyond the conformity requirements, there are relatively few barriers to exporting automotive products to the UAE. The UAE is currently the sixth largest destination for U.S. exports of new passenger cars ($1.4 billion) and second largest destination for used vehicles ($426 million). These present an opportunity for increased exports of U.S. aftermarket parts for those vehicles. Also, due to negligible automotive-related production in the UAE, American vehicle parts exported from the U.S. have good market potential especially since minor homologation changes may be required. In addition, aftermarket parts for off-road vehicles and SUVs have good potential in the UAE. SUVs and 4x4 cars are especially popular in the UAE and there is a high level of interest in off-road and desert driving.