Dealers – and carmakers – believe that the spike in ex-showroom prices of just about every brand requires them to offer counter measures to assuage buyer concerns. Between 2021 to now, new car prices in the UAE have increased by an average 10-15 per cent, first from the higher shipping costs and thereafter by incremental gains on the production side.

UAE new car – and of pre-owned – sales have kept up a steady growth tempo during this period, but dealer sources believe buyers need to believe they have got themselves a good deal. “Our hands have been tied when it comes to offering straight discounts, but incentive add-ons are doable,” said the CEO at a leading local dealer. “We find that extended free insurance and warranty are two major considerations for owners rather than upfront discounts on the car price.”

Motor insurance premiums have risen by an average 9-12 per cent in the year-to-date, according to insurance industry sources. That such an increase was due had been communicated loud and clear right from the second-half of 2022, so as to give owners ample time to prepare themselves.

Luxury models and SUVs obviously carry a higher premium, and so does for any owner who has had the misfortune to file claims at any point in the previous insured period.

Then there are the rate hikes

Auto financing rates too have had successive increases, reflecting the 10 hikes brought on by the US Federal reserve and then co-opted by the UAE Central Bank. On a flat loan basis, the rate currently would be around the 4-5 per cent mark.

Getting it done at third-party garages

Where possible, insurers have been telling car owners with claims to get repairs done at independent garages – and at lower prices – rather than the official dealer. (It is less prevalent where hybrids and EVs are concerned, but even on luxury models, there are third-party garages insurers are directing customers to.)

This is where dealers are fighting back with the longer free insurance offer and the extended warranty schemes. “Car buyers will be given every incentive to do their regular service and maintenance at the official dealers,” said the CEO. “We are in constant talks with all the leading motor insurers to get the work done internally – rather than have them prefer outside garages.

“The level of sophistication in today’s cars require hands-on knowledge from technicians, and we have the ones with the required skills. And regularly updated too.”

An influx of new operators

In the recent past, there have been a slew of independent garages opening in Dubai and the UAE. There are the niche operators who have the in-house credentials to handle complex jobs on luxury models – and increasingly, on EVs and hybrids too.

“The cost of car ownership is becoming a live issue, and there could be further increases on motor premiums,” said Avinash Babur, CEO of InsuranceMarket.ae. “We are seeing 5-year/100,000 kilometer warranties becoming the norm in the UAE.

“Going forward, the market could see more specialised motor warranty schemes being offered by insurers – on top of what’s provided by the dealer. Because what we are seeing now is owners holding their vehicles for longer.”

Will Chinese car brands rewrite incentives?

The first lot of new Chinese automotive brands and their models are going on sale at their UAE dealerships, including multiple EV and hybrid options. With Chinese carmakers, the plan would be to create conditions for an immediate impact – and offering incentives would come with that.

“Chances are they will add another ‘extended’ to the already extended incentives others are offering,” said a dealer source. “Some are toying with 7-year warranty, and these are new directions to take in the UAE car market.”

Will non-Chinese brand dealerships follow? It will all come down to how price conscious buyers start getting…