This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 4/23/2018

Overview

The U.A.E. automotive industry faced tough challenges in 2016, and the trend is likely to continue through 2017 due to lack of economic clarity in the near future, overstocking of cars by dealers, and abundant availability of certified pre-owned vehicles.

That said, the U.A.E. will continue to be one of the most robust automotive markets in the GCC thanks 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 U.A.E.  The outlook is particularly favorable for the sale of luxury cars, electric and hybrid vehicles, and motorcycles.  And, due to likely increase in migration from neighboring countries with inadequate public transport, buying cars should remain a priority for new residents.

The U.A.E. relies heavily on imports, with virtually the entire supply of car and light vehicles being imported. Barring a couple of truck units assembling CKD components and armored vehicles factories, there is no serious automotive manufacturing activity in the U.A.E.

Passenger Cars

Approximately 80 percent of the U.A.E. automotive market is passenger cars and the remaining 20 percent is commercial vehicles (trucks, vans and buses).  In 2017, Japanese manufacturers Toyota, Nissan and Mitsubishi remained the leading sellers of passenger cars in the U.A.E. Toyota retained its position as the market leader with 29.7 percent share, followed by Nissan at 15.2 percent, and Mitsubishi at 9.4 percent.  The top three brands comprised over 54.3 percent of total passenger car sales in the U.A.E. in 2016.

Among the U.S. manufacturers, only Ford and Chevrolet were featured among the top 10 brands.  Ford sold 12,256 (down from 16,077 units in 2015) and in the sixth position with a market share of 3.8 percent, while  Chevrolet reportedly sold 7,930 units (2.5 percent).

For luxury cars, the demand remained strong across the sub-segment and this trend is expected to continue through 2020. With 20,018 units, BMW saw a 5 percent increase in its U.A.E. sales during 2016 with 6.3 percent market share, while Lexus sold 10,402 units, featuring eighth among the U.A.E. top-10 best-selling automotive brands. Other luxury brands that performed well in 2016 included Jaguar (+15 percent) and Maserati (+14 percent).

Commercial Vehicles

With major infrastructure and housing projects being planned, this sector will experience continued growth. While light commercial vehicles sales should see a surging effect due to increased business and investments associated with increased migration from neighboring countries, heavy commercial vehicles sales will continue to be supported by extensive infrastructure and other construction projects. Also, to cater to increased tourism and hospitality activities in the U.A.E., as well as growing demand for use by construction workers, the demand for bus and minibus will see continued positive growth.  Leading sellers of commercial vehicles in U.A.E. include Toyota and Nissan. In the bus sub-segment, Hyundai is reportedly the leading player followed by other Chinese brands.
Tariffs: The tariff applied to cars is 5 percent customs duties (on value of the vehicle plus 1 percent insurance plus cost of the shipment). For trucks, the customs duty is 12 percent.

Taxes: No VAT, luxury tax or special consumption tax currently exist on vehicles. However, the U.A.E. government will impose 5 percent VAT from January 1, 2018 on vehicles sold in the country.

Barriers: The U.A.E.’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.

Market Entry

All cars and buses entering U.A.E. 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 in cars and 100 km 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
Truck approvals are conducted at the GCC level by the GCC Standards Organization which is based in Riyadh, KSA. The product should be first approved by GSO before the truck CAN be exported to GCC countries, including the U.A.E.

U.S. truck manufacturers or exporters may contact the office below for approval:
Conformity Assessment Department
G.C.C Standardization Organization (GSO)
Tel: +966 1 274 66 55 ext. 333; Fax: +966 1 210 53 90
E-mail: alsagr@gso.org.sa 

Leading Sub-Sectors

Alternate Fuel Vehicles

The U.A.E. has stepped up measures to promote electric vehicles (EV’s) in order to reduce carbon footprint and is working on standardizing its regulations governing EV’s. Various government entities, like 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 future.

In addition, the Emirates Authority for Standardization and Metrology (ESMA) has set standards for imported EV’s 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.
Underling this initiative, Tesla launched operations in the U.A.E. via an online platform and a store in Dubai Mall. This is to be followed by Tesla Service Centers in Dubai (in July 2017) and Abu Dhabi (early 2018).

U.S. manufacturers exploring to do business in the region may find it worthy to note that apart from EV’s, the U.A.E. government encourages autonomous vehicle technology, research and development into driverless vehicles and other smart, green and environment friendly technologies, such as, alternate fuel vehicles, including Hybrid and Hydrogen vehicles. 

Motorcycles

Demand for motorcycles is on the rise in the U.A.E., both for lower end (used by expatriate workers) and higher end (used by richer U.A.E. consumers). Companies like Harley-Davidson, Honda, and Kawasaki have operations in the U.A.E. but other companies like, Hero MotoCorp and Royal Enfield (from India) and others are also expanding to the market. 

Used Cars

As a regional trade hub supporting intense international business activity, the U.A.E. presents an extremely competitive business landscape for American companies in this sector. However, the U.A.E. Ministry of Interior recently announced that as of May 1, 2017 registration of imported used vehicles will 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 current demand and facing foreign competition.  Also, with increased emphasis on consumer safety, the U.A.E. government is introducing new regulations for Safety of Imported Used Light Vehicles to U.A.E. and safety requirement for Modified Vehicles. More information can be found on the Emirates Authority for Standardization and Metrology.

Regulations

All vehicles must be conformity to the U.A.E. standards and their steering wheels must not be modified.
There must be no damages on the vehicle outer body.

The U.A.E. does not allow import 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.

Required Documents

Proof of vehicle ownership and invoice attested by the local chamber of commerce in the U.S.
Export declaration of the customs administration in the U.S. The invoice and the certificate of origin shall be attached to the export declaration.

A document issued by Police in the U.S. indicating that the vehicle is not wanted for any criminal investigation.

Parts and Components

The U.A.E.’s auto aftermarket has developed at a robust pace thanks to the strength of the country’s economy, high private consumption levels and a growing population.  The U.A.E.’s strategic positioning and economic conditions has lead the country to become a regional hub for car parts and vehicle components in the entire Middle East and GCC. As a result, the U.A.E. has become a key player 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 for longer.

U.S. auto parts exports to U.A.E. have grown from $393.9 million in 2011 to $594.3 million in 2016. In 2015 (latest figures available), the United States was U.A.E.’s third largest source of auto parts with over 7 percent of the import market. Japan was the largest source, comprising 13.6 percent of the imports, followed by Korea – 8.4 percent.
Major components included sedan tires, batteries, truck and bus tires, fuel filters and clutches. The tariff for radiators and filters is 12 percent and is 5 percent for all other spare parts. 5 percent VAT will be added to the sales price from January 1, 2018.

Local Standards Requirements

GSO Standards tests for motor vehicle spare parts:
U.A.E. Scheme for Automotive Spare Parts
GSO Standards tests for multipurpose tires

U.S. Tire suppliers must ensure that RFID labels are affixed on their tires before entering to U.A.E. market. For more information about RFID labels, please see: U.A.E. Tire Labeling Scheme.

Re-Manufactured/Used Auto Parts

Importation of reconditioned/used auto parts is not allowed for sale in the U.A.E., 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 as there are a number of American cars sold within the U.A.E. and also a number of used American cars are re-exported to other neighboring countries through the U.A.E. Rebuilding of parts in the U.A.E. is limited to auto mechanics offering their clients an extra service in their maintenance of cars.

The 5 percent 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.

Opportunities

Currently, there are relatively few barriers to exporting automotive products to U.A.E. beyond the conformity requirements previously mentioned. Since there is currently negligible automotive-related production in the U.A.E., U.S. vehicle and parts exports to the U.A.E. Arabia are currently supported by the country’s acceptance of vehicles/parts produced to U.S. standards. Therefore, relatively few homologation changes are needed prior to export to the U.A.E..

The U.A.E. currently is the sixth largest destination for U.S. exports of new passenger cars ($ 1.4 bn.) and second largest destination for used vehicles ($ 426 MN.). These present an opportunity for increased exports of U.S. aftermarket parts for those vehicles.

Aftermarket parts for off-road vehicles and SUVs have good potential in the U.A.E.. SUVs and 4x4 cars are especially popular in the U.A.E. and there is a high level of interest in off-road and desert driving. Larger vehicles are popular in order to accommodate large families, and the Detroit Three excel in this competitive segment, particularly the larger SUV market.

Given U.A.E.’s  (both nationals and expatriates) high disposable income levels and an interest in classic, modified and luxury vehicles, there is great demand for specialty performance and appearance products. U.S. companies command a leading position in the supply of transmissions, tuning and high performance parts and kits, steering, suspension, and brake components and parts.

Web Resources

BMI Report
Government of Dubai Customs Agency
GCC Standardization Organization 
Emirates Authority for Standardization and Metrology
U.S. Department of Commerce, Bureau of the Census, Foreign Trade Division

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



United Arab Emirates Automotive Trade Development and Promotion