Al Futtaim Group Case Study

Only available on StudyMode
  • Download(s) : 77
  • Published : July 24, 2010
Open Document
Text Preview
Al Futtaim Motors

INTRODUCTION
The UAE is to position itself as a regional focal point for the commercial vehicles industry in the Middle East, which is aiming for more major growth as the market recovers from the effects of the global economic crisis. This is already a thriving business in the Middle East, and all the signs point to a great deal of expansion over the next few years as the market recovers from the economic crisis and more manufacturers start production here. The UAE is at the centre of regional growth in the commercial vehicles sector, largely due to the country's expanding public transport requirements.

An overview of the Automotive Industry in UAE
Auto sales in the UAE are expected to rise 5 per cent between 2009 and 2010 as an easing in liquidity conditions boosts confidence in the sector. 1 A general high-level of disposable income and renewed consumer confidence in the UAE on the back of easing liquidity conditions, provides a favorable background for the auto sector in the coming months. Furthermore, plans for a car production plant in the UAE could help initiate a local automotive manufacturing industry.

Since the UAE is the fastest growing auto market in the Middle East, the sector is in a position to expand with preliminary plans for a car production plant to help spawn a local auto manufacturing industry already in place. The automotive sector was affected by the financial crisis as banks became more cautious in granting auto loans; but with the UAE accelerating on the path to economic recovery, banks are now being more flexible with auto financing which will no doubt benefit the sector, fuel the demand, and ultimately increase sales.

The analysis disclosed that it is increasingly apparent that the UAE automotive market is mature, with vehicle ownership rates of over 540 per 1,000 inhabitants a rate that exceeds most of the developing world.

Car dealers in the UAE are optimistic on the outlook for the second half of 2009 and are confident that their sales will grow though at a lower rate, in what seems like a challenging year on the back of the global financial crisis. This is primarily down to an easing in lending conditions with banks loosening their belts and imposing lower rates and more lenient requirements on borrowers. Over 70 per cent of new car purchases are made on credit in the UAE. The combination of relatively high living standards, a growing population in the UAE, as well as a resurgence in oil prices, have been the key driving forces behind the growth in the auto sector in the UAE. Despite an expected slowdown in auto sales this year, the outlook based on resurgence in consumer demand on the back of a pick-up in the global economy is likely to lead to robust growth in 2010 and beyond.

Whilst the UAE does not possess a sizable domestic automobile manufacturing capability, its high national wealth has created a niche market for sales of imported vehicles in recent years, and there is a large re-export trade based on the country's regional status as a key strategic location. Car ownership is expected to rise above 55 per cent this year for the first time in the country's history. The analysis further revealed that though Abu Dhabi contributes over 55 per cent to overall UAE GDP, its economy is dominated by the energy sector. Thus, it is diversified Dubai that is experiencing the most rapid growth, and it has taken a lead in the auto sector, accounting for nearly 50 per cent of the total vehicle stock.

EXECUTIVE SUMMARY

Al-Futtaim Motors are the sole distributors for Toyota, Lexus and Hino brands in the UAE. Since the company's inception in 1955 it holds the pre-eminent position of being the largest distributor of automotive products and services in the UAE. In addition, the company holds the distinction of being one of the largest private conglomerates in the gulf region. Al Futtaim Motors represent the HINO brand in the UAE since 1985. Hino Division...
tracking img