Overall consumer spending on premium and luxury cars decreased in 2020 as a result of a general reduction in consumer spending and the contraction of the economy in the UAE. The contraction of the UAE economy has, in part, been affected by a drop in oil prices as well as the impact of travel, lockdown and social distancing restrictions on the economy.
The UAE relies heavily on imported products in premium and luxury cars with its entire supply being sourced overseas. Usually, wholesale importers and distributors build up a pipeline of orders lasting several months from potential buyers and company inventories.
The leading companies in premium and luxury cars in the United Arab Emirates, such as Bayerische Motoren Werke AG and Daimler AG, have had to adapt their brand strategies in 2020 in order to revive consumer confidence. These companies have focused on softer and more consumer-focused advertising strategies by, for example, working with the Dubai police force to support the #stayhome campaign.
The population of wealthy consumers in the United Arab Emirates is expected to increase over the course of the forecast period, which is expected to have a positive effect on sales of premium and luxury cars in the country. Furthermore, as travel restrictions and COVID-19 social distancing measures come to an end, consumer spending on cars is expected to increase, leading to a sharp rise in retail current value sales in premium and luxury cars in 2021.
In July 2020, the Kingdom of Saudi Arabia increased its Value Added Tax from 5% to 15%. This had a negative impact on sales of premium and luxury cars in Saudi Arabia and, in turn, created a surge in demand in the United Arab Emirates.
Many brands in premium and luxury cars, such as BMW and Mercedes-Benz have deferred launches of new products until 2021. This will contribute to the short term rise in consumer interest in premium and luxury cars going into the forecast period.
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This report originates from Passport, our Luxury Cars research and analysis database.
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