Automotive sales impacted by pandemic

Haider al Lawati

While a number of economic sectors in the region have been affected by the COVID-19 pandemic since the beginning of the outbreak in January this year, some have been impacted worse than others.  Notable is the case of automotive sales.  Even before the coronavirus outbreak, car sales in some GCC countries including the Sultanate had fallen by approximately 30 per cent, partly due to cost-cutting measures announced by governments and other actions that have limited the spending power of public and private sector employees.

The slump in new car sales comes amid rising inventories at auto plants, warehouses, and ports despite offers by manufacturers and distributors to offer their vehicles to customers at low prices. Today, new models are coming on the market even as car distributors struggle to get rid of their inventories of new cars made during 2018 and 2019.  Promotional advertisements on social media constantly try to encourage customers to buy recent models with incentives in the form of interest-free funding, free insurance and free registration. The models on offer are not only small saloon cars but also four-wheel drive vehicles preferred by many young people in the region. No doubt, the market suffers from a large oversupply amid a modest demand for cars.

Unlike other goods, the business of automotive sales and marketing requires investment in support infrastructure, in the form of showrooms, expansive display areas, and well-equipped facilities for repair and maintenance. Today, some entrepreneurs have turned to social media to sell vehicles in cooperation with overseas supplier at concessional prices, often to the detriment of local distributors.

It is possible that this sector will face another dilemma in the coming years, especially when hybrid cars that operate on a combination of electrical power and fossil fuel come on the market in large volumes.  Today we see that electric and hybrid cars can perform reasonably well because of their environment-friendly features – characteristics that will appeal to environment-conscious customers, as well as official institutions.  These new vehicles not only offer better fuel efficiency but also do not pollute the air. Their arrival into the region will not only offer people a wide choice of models to choose from, but will also contribute to the gradual phasing out of older models in the coming years.