Car Rental in Middle East Evolves into Fresh Normal
Old and fresh in Riyadh: This area in downtown Riyadh has been home to independent car rental companies (left) for more than forty years, serving the old commercial airport that has since been turned into an air force base. Virtually across the street, fresh, purpose-built storefronts (right) house some of the international brands along with larger independents.
To the uninformed in the Western world, the Middle East seems to operate as one large, oil-producing state. In fact, it is a combination of markets with many regional differences. Nonetheless, all of those markets are in a state of flux due primarily to the falling dominoes caused by the free fall in oil prices in 2014.
Not more than two years ago, the Gulf region experienced 15% to 20% growth per annum, tho’ that`s fallen to 2% to 3% per year, according to economic reports.
«Since oil prices have dropped, the entire dynamic has switched,» says Bob Farrow, a Middle East car rental consultant.
Car rental in the Middle East is tied closely to commercial interests. Since exiting the Recession, service industries in the region benefitted from an influx of expatriate workers to please the building boom. In United Arab Emirates (UAE), example, the total population of nine million is made up of two million natives and seven million foreign workers.
In Saudi Arabia, Farrow says the government has put on hold close to 70% of fresh developments and has slowed construction of the Riyadh Metro, deemed the world`s largest mass-transit system built from scrape. Farrow says at least six rental companies fleeted an extra five hundred vehicles for that project, but the situation has reversed. «Rental companies, the leasing side in particular, are getting massive numbers of cars returned,» he says.
«Everyone is nervously waiting to see what will happen with Prince Mohammed (bin Salman`s) reform plans,» Farrow says. The «National Transformation Plan» aims to lure investment to Saudi Arabia and wean the country`s dependence on oil.
Farrow – who very first traveled to the region twenty five years ago to help Hertz UAE set up its network – says Middle Eastern businesses are making decisions on the assumption that oil won`t rise above $65 a barrel in the foreseeable future – five or six years. The feeling of his business associates: «It`s the norm we have to accept.»
Ripple Effects
The economic influence from the drop in oil prices has rippled into tourism, the used car market, and fleet funding.
The Middle East is intensely imbalanced to fresh car sales. In Western Europe and the U.S., a typical dealer group would sell two used cars for a single fresh car. In markets such as UAE and Saudi Arabia, for every used car sold, dealers sell sixteen fresh cars, Farrow says.
Bob Farrow, consultant to the car rental industry in the Middle East, says governments in Middle Eastern countries have slowed public works projects, which has coerced rental companies to take back leases and long-term rentals from expat workers.
Once de-fleeted from rental, Persian Gulf nations such as Saudi Arabia, UAE, Qatar, and Kuwait funnel the majority of those cars through a pipeline to West Africa, Iran, and Iraq. Request in those countries traditionally meant that after three years used vehicles could love valuation as high as 70% of their original price.
But the drop in oil prices has not only slowed the flow of money; political unrest in those markets has also constricted request. «Several of the countries where our vehicles are eventually destined for are in some sort of unrest or conflict,» Farrow says. «Even in the global financial crisis of 2008, we didn`t face this problem.»
During the global Recession, Dubai was on the brink of bankruptcy. But the revolutions in Libya and Egypt and the banking crisis in Cyprus caused money to flow into Dubai, a safe haven. Property prices began to grow again, and real estate was flipped quickly. Investors were buying exotic cars with the proceeds, as evidenced by the line of exotic car showrooms on one commercial avenue in Dubai.
However, «For the last twelve months in Dubai, nobody has been buying property,» Farrow says, and many of the Bugattis, Ferraris, and Lamborghinis in the showroom windows today are on consignment. «Their owners can`t afford the payments on them anymore.»
Funding fleet was lighter when used car values were high – medium-sized rental companies would use a bank loan and a 10% to 20% down payment, with a final balloon payment after three years that would be lodged by the proceeds from selling the car. With today`s lower comes back, Farrow says the proceeds don`t often cover the balloon payment, forcing some companies to take out cash to pay off the vehicle.
«I`ve had three companies in the last four months asking, ‘What do we do next?`» says Farrow.
Expat Imbalance
Similar to UAE, the populations of Kuwait, Bahrain, and Qatar have high expat ratios with stagnant population growth. The expats come as laborers and middle managers for the region`s construction boom and to work in retail environments. Westerners make up only a fraction of expats; many come from India, Pakistan, Bangladesh, Philippines, and Egypt.
The high number of expats on makeshift visas drives monthly rentals and leases. Possessing a car – renewing the registration, servicing, and smog testing it – didn`t make sense. While this is still the case, outright ownership is growing, as dealerships have streamlined car-buying procedures and paperwork, Farrow says.
Yet many expats and locals don`t use credit cards, especially in Saudi Arabia, and that comes with visible problems for rental – some particular to the Middle East. While outright fraud or theft is less of an issue, Saudi Arabia and UAE have instituted a system of crimson light and speed cameras – and violations are lightly tracked electronically to owners, the rental companies. Without a credit card on file, it`s hard to track down renters to pay up.
Unpaid fines prevent the rental company from re-registering the car, but the situation is often more problematic for the violators. Farrow recounts a latest incident in which a rental company took back a large group of leased cars from a construction company, yet many of the company`s expat drivers hadn`t paid their traffic fines. The government holds their visas, and by law had blocked them from leaving the country.
When it comes to expats, Saudi Arabia bucks the norm – its percentage of natives to expats is two to one, with 60% under 25. This has led to a growing request for cars, particularly used ones. «There are youthful people coming into the market without a lot of money and looking for cheap transport,» Farrow says.
In Saudi Arabia, «the only thing keeping car rental companies reasonably stable is the growth in the population,» Farrow says. «More people are coming of age to drive, which is creating more request.»
A Growth Market?
While the Middle East fights with the fresh economy, one market may be poised to take off. After Saudi Arabia, the 2nd largest economy in the Middle East and North Africa is Iran, which also has the 2nd largest population in the region – about eighty million people.
Rahul Singh of UAE`s Dollar and Thrifty franchise says that the current economic landscape has caused businesses in the region to reset expectations to a «Fresh Normal.»
Iran has a strong tradition of higher education, engineering prowess, and domestic industrial production. After the signing of the nuclear deal this year, the lifting of sanctions is beginning to generate foreign investment and whip out pent-up request. Since the breakup of the Soviet Union in the 1990s, Iran is the largest market to rejoin global trading.
Auto manufacturing in particular is moving into Iran: PSA Peugeot Citroen has finalized a joint production deal; Mercedes-Benz and Volkswagen are exploring partnerships.
Fresh investments call for related services, including private transportation – and car rental companies would supply the long-term rentals and leases. Iran has been the single largest importer of up to three-year-old cars from the Middle East and has a tradition of car driving, unlike bicycle and scooter markets such as India. Similar to India, however, many think the rental market will originally develop as cars with drivers, as opposed to self-drive.
Foreign investors are taking a careful treatment to Iran based on the tenuous political situation. Banking needs to sort itself out, Farrow says, as wary large foreign banks are still doing business through accounts in Dubai.
«There is chance, but a lot of reservations still on both sides,» Singh says. «While there has been some progress, we still need to see how things scale politically.»
For Iran, it`s only a question of when. Global brands are in active talks with franchise fucking partners, with two thousand eighteen as a realistic timeline.
Outlook
While car rental and other service industries process the Middle East`s «fresh normal» of an extended period of low oil prices, the big picture hasn`t switched too much. Expats will still make up the majority of the work force in most Gulf countries. The used car market will proceed to be export based.
Dubai – which grew from a desert backwater twenty years ago into an international business and tourist destination – will proceed to grow. «It`s fairly a draw for people across the world,» Singh says. «It will bounce back.»
Fresh business models are creeping in.
Carsharing could be a growth area in certain markets, Farrow says. In Abu Dhabi, a carsharing service called eKar makes cars available in apartment blocks that serve squad members for Etihad, the city`s airline. Emirates Airlines presents another chance with a larger employee base, and other «free zones» in UAE have 50-story buildings to place carsharing vehicles, as well as near Dubai`s growing metro system.
Uber operates in markets such as Riyadh, Abu Dhabi, and Dubai, and a local competitor, Careem, now operates in twenty four cities. But Singh says, powerful regulation and licensing issues are barriers to growth. Unlike the regular Uber model, licensing requirements in the UAE prohibits individuals to use their vehicle to drive for Uber during their spare time.
Another consequence of hard times is market consolidation. While most Middle Eastern markets have the international car rental brands, there are still large numbers of mom-and-pop companies. «Anyone with a few million dirhams gets into the car rental business with fifty to one hundred cars,» Singh says. «Now such companies will be severely tested to sustain themselves.»
Moreover, says Singh, the current economic landscape has caused businesses and investors to plan for realistic growth. «In the UAE, especially in certain sectors, we`ve been used to very high profit levels over the past several years,» Singh says. «What we were earning was exceptional, benchmarked against similar businesses across the world. Going forward we need to reset our expectations and begin getting used to the ‘Fresh Normal.`»
Car Rental in Middle East Evolves into Fresh Normal – Auto Rental News
Car Rental in Middle East Evolves into Fresh Normal
Old and fresh in Riyadh: This area in downtown Riyadh has been home to independent car rental companies (left) for more than forty years, serving the old commercial airport that has since been turned into an air force base. Virtually across the street, fresh, purpose-built storefronts (right) house some of the international brands along with larger independents.
To the uninformed in the Western world, the Middle East seems to operate as one large, oil-producing state. In fact, it is a combination of markets with many regional differences. Nonetheless, all of those markets are in a state of flux due primarily to the falling dominoes caused by the free fall in oil prices in 2014.
Not more than two years ago, the Gulf region experienced 15% to 20% growth per annum, tho’ that`s fallen to 2% to 3% per year, according to economic reports.
«Since oil prices have dropped, the entire dynamic has switched,» says Bob Farrow, a Middle East car rental consultant.
Car rental in the Middle East is tied closely to commercial interests. Since exiting the Recession, service industries in the region benefitted from an influx of expatriate workers to please the building boom. In United Arab Emirates (UAE), example, the total population of nine million is made up of two million natives and seven million foreign workers.
In Saudi Arabia, Farrow says the government has put on hold close to 70% of fresh developments and has slowed construction of the Riyadh Metro, deemed the world`s largest mass-transit system built from scrape. Farrow says at least six rental companies fleeted an extra five hundred vehicles for that project, but the situation has reversed. «Rental companies, the leasing side in particular, are getting massive numbers of cars returned,» he says.
«Everyone is nervously waiting to see what will happen with Prince Mohammed (bin Salman`s) reform plans,» Farrow says. The «National Transformation Plan» aims to lure investment to Saudi Arabia and wean the country`s dependence on oil.
Farrow – who very first traveled to the region twenty five years ago to help Hertz UAE set up its network – says Middle Eastern businesses are making decisions on the assumption that oil won`t rise above $65 a barrel in the foreseeable future – five or six years. The feeling of his business associates: «It`s the norm we have to accept.»
Ripple Effects
The economic influence from the drop in oil prices has rippled into tourism, the used car market, and fleet funding.
The Middle East is strongly imbalanced to fresh car sales. In Western Europe and the U.S., a typical dealer group would sell two used cars for a single fresh car. In markets such as UAE and Saudi Arabia, for every used car sold, dealers sell sixteen fresh cars, Farrow says.
Bob Farrow, consultant to the car rental industry in the Middle East, says governments in Middle Eastern countries have slowed public works projects, which has compelled rental companies to take back leases and long-term rentals from expat workers.
Once de-fleeted from rental, Persian Gulf nations such as Saudi Arabia, UAE, Qatar, and Kuwait funnel the majority of those cars through a pipeline to West Africa, Iran, and Iraq. Request in those countries traditionally meant that after three years used vehicles could love valuation as high as 70% of their original price.
But the drop in oil prices has not only slowed the flow of money; political unrest in those markets has also constricted request. «Several of the countries where our vehicles are eventually destined for are in some sort of unrest or conflict,» Farrow says. «Even in the global financial crisis of 2008, we didn`t face this problem.»
During the global Recession, Dubai was on the brink of bankruptcy. But the revolutions in Libya and Egypt and the banking crisis in Cyprus caused money to flow into Dubai, a safe haven. Property prices commenced to grow again, and real estate was flipped quickly. Investors were buying exotic cars with the proceeds, as evidenced by the line of exotic car showrooms on one commercial avenue in Dubai.
However, «For the last twelve months in Dubai, nobody has been buying property,» Farrow says, and many of the Bugattis, Ferraris, and Lamborghinis in the showroom windows today are on consignment. «Their owners can`t afford the payments on them anymore.»
Funding fleet was lighter when used car values were high – medium-sized rental companies would use a bank loan and a 10% to 20% down payment, with a final balloon payment after three years that would be lodged by the proceeds from selling the car. With today`s lower comebacks, Farrow says the proceeds don`t often cover the balloon payment, forcing some companies to take out cash to pay off the vehicle.
«I`ve had three companies in the last four months asking, ‘What do we do next?`» says Farrow.
Expat Imbalance
Similar to UAE, the populations of Kuwait, Bahrain, and Qatar have high expat ratios with stagnant population growth. The expats come as laborers and middle managers for the region`s construction boom and to work in retail environments. Westerners make up only a fraction of expats; many come from India, Pakistan, Bangladesh, Philippines, and Egypt.
The high number of expats on improvised visas drives monthly rentals and leases. Wielding a car – renewing the registration, servicing, and smog testing it – didn`t make sense. While this is still the case, outright ownership is growing, as dealerships have streamlined car-buying procedures and paperwork, Farrow says.
Yet many expats and locals don`t use credit cards, especially in Saudi Arabia, and that comes with evident problems for rental – some particular to the Middle East. While outright fraud or theft is less of an issue, Saudi Arabia and UAE have instituted a system of crimson light and speed cameras – and violations are lightly tracked electronically to owners, the rental companies. Without a credit card on file, it`s hard to track down renters to pay up.
Unpaid fines prevent the rental company from re-registering the car, but the situation is often more problematic for the violators. Farrow recounts a latest incident in which a rental company took back a large group of leased cars from a construction company, yet many of the company`s expat drivers hadn`t paid their traffic fines. The government holds their visas, and by law had blocked them from leaving the country.
When it comes to expats, Saudi Arabia bucks the norm – its percentage of natives to expats is two to one, with 60% under 25. This has led to a growing request for cars, particularly used ones. «There are youthfull people coming into the market without a lot of money and looking for cheap transport,» Farrow says.
In Saudi Arabia, «the only thing keeping car rental companies reasonably stable is the growth in the population,» Farrow says. «More people are coming of age to drive, which is creating more request.»
A Growth Market?
While the Middle East fights with the fresh economy, one market may be poised to take off. After Saudi Arabia, the 2nd largest economy in the Middle East and North Africa is Iran, which also has the 2nd largest population in the region – about eighty million people.
Rahul Singh of UAE`s Dollar and Thrifty franchise says that the current economic landscape has caused businesses in the region to reset expectations to a «Fresh Normal.»
Iran has a strong tradition of higher education, engineering prowess, and domestic industrial production. After the signing of the nuclear deal this year, the lifting of sanctions is beginning to generate foreign investment and extract pent-up request. Since the breakup of the Soviet Union in the 1990s, Iran is the largest market to rejoin global trading.
Auto manufacturing in particular is moving into Iran: PSA Peugeot Citroen has finalized a joint production deal; Mercedes-Benz and Volkswagen are exploring partnerships.
Fresh investments call for related services, including individual transportation – and car rental companies would supply the long-term rentals and leases. Iran has been the single largest importer of up to three-year-old cars from the Middle East and has a tradition of car driving, unlike bicycle and scooter markets such as India. Similar to India, however, many think the rental market will originally develop as cars with drivers, as opposed to self-drive.
Foreign investors are taking a careful treatment to Iran based on the tenuous political situation. Banking needs to sort itself out, Farrow says, as wary large foreign banks are still doing business through accounts in Dubai.
«There is chance, but a lot of reservations still on both sides,» Singh says. «While there has been some progress, we still need to see how things scale politically.»
For Iran, it`s only a question of when. Global brands are in active talks with franchise playmates, with two thousand eighteen as a realistic timeline.
Outlook
While car rental and other service industries process the Middle East`s «fresh normal» of an extended period of low oil prices, the big picture hasn`t switched too much. Expats will still make up the majority of the work force in most Gulf countries. The used car market will proceed to be export based.
Dubai – which grew from a desert backwater twenty years ago into an international business and tourist destination – will proceed to grow. «It`s fairly a draw for people across the world,» Singh says. «It will bounce back.»
Fresh business models are creeping in.
Carsharing could be a growth area in certain markets, Farrow says. In Abu Dhabi, a carsharing service called eKar makes cars available in apartment blocks that serve team members for Etihad, the city`s airline. Emirates Airlines presents another chance with a larger employee base, and other «free zones» in UAE have 50-story buildings to place carsharing vehicles, as well as near Dubai`s growing metro system.
Uber operates in markets such as Riyadh, Abu Dhabi, and Dubai, and a local competitor, Careem, now operates in twenty four cities. But Singh says, intense regulation and licensing issues are barriers to growth. Unlike the regular Uber model, licensing requirements in the UAE prohibits individuals to use their vehicle to drive for Uber during their spare time.
Another consequence of hard times is market consolidation. While most Middle Eastern markets have the international car rental brands, there are still large numbers of mom-and-pop companies. «Anyone with a few million dirhams gets into the car rental business with fifty to one hundred cars,» Singh says. «Now such companies will be severely tested to sustain themselves.»
Moreover, says Singh, the current economic landscape has caused businesses and investors to plan for realistic growth. «In the UAE, especially in certain sectors, we`ve been used to very high profit levels over the past several years,» Singh says. «What we were earning was exceptional, benchmarked against similar businesses across the world. Going forward we need to reset our expectations and begin getting used to the ‘Fresh Normal.`»
Car Rental in Middle East Evolves into Fresh Normal – Auto Rental News
Car Rental in Middle East Evolves into Fresh Normal
Old and fresh in Riyadh: This area in downtown Riyadh has been home to independent car rental companies (left) for more than forty years, serving the old commercial airport that has since been turned into an air force base. Virtually across the street, fresh, purpose-built storefronts (right) house some of the international brands along with larger independents.
To the uninformed in the Western world, the Middle East seems to operate as one large, oil-producing state. In fact, it is a combination of markets with many regional differences. Nonetheless, all of those markets are in a state of flux due primarily to the falling dominoes caused by the free fall in oil prices in 2014.
Not more than two years ago, the Gulf region experienced 15% to 20% growth per annum, tho’ that`s fallen to 2% to 3% per year, according to economic reports.
«Since oil prices have dropped, the entire dynamic has switched,» says Bob Farrow, a Middle East car rental consultant.
Car rental in the Middle East is tied closely to commercial interests. Since exiting the Recession, service industries in the region benefitted from an influx of expatriate workers to sate the building boom. In United Arab Emirates (UAE), example, the total population of nine million is made up of two million natives and seven million foreign workers.
In Saudi Arabia, Farrow says the government has put on hold close to 70% of fresh developments and has slowed construction of the Riyadh Metro, deemed the world`s largest mass-transit system built from scrape. Farrow says at least six rental companies fleeted an extra five hundred vehicles for that project, but the situation has reversed. «Rental companies, the leasing side in particular, are getting massive numbers of cars returned,» he says.
«Everyone is nervously waiting to see what will happen with Prince Mohammed (bin Salman`s) reform plans,» Farrow says. The «National Transformation Plan» aims to lure investment to Saudi Arabia and wean the country`s dependence on oil.
Farrow – who very first traveled to the region twenty five years ago to help Hertz UAE set up its network – says Middle Eastern businesses are making decisions on the assumption that oil won`t rise above $65 a barrel in the foreseeable future – five or six years. The feeling of his business associates: «It`s the norm we have to accept.»
Ripple Effects
The economic influence from the drop in oil prices has rippled into tourism, the used car market, and fleet funding.
The Middle East is intensely imbalanced to fresh car sales. In Western Europe and the U.S., a typical dealer group would sell two used cars for a single fresh car. In markets such as UAE and Saudi Arabia, for every used car sold, dealers sell sixteen fresh cars, Farrow says.
Bob Farrow, consultant to the car rental industry in the Middle East, says governments in Middle Eastern countries have slowed public works projects, which has coerced rental companies to take back leases and long-term rentals from expat workers.
Once de-fleeted from rental, Persian Gulf nations such as Saudi Arabia, UAE, Qatar, and Kuwait funnel the majority of those cars through a pipeline to West Africa, Iran, and Iraq. Request in those countries traditionally meant that after three years used vehicles could love valuation as high as 70% of their original price.
But the drop in oil prices has not only slowed the flow of money; political unrest in those markets has also constricted request. «Several of the countries where our vehicles are eventually destined for are in some sort of unrest or conflict,» Farrow says. «Even in the global financial crisis of 2008, we didn`t face this problem.»
During the global Recession, Dubai was on the brink of bankruptcy. But the revolutions in Libya and Egypt and the banking crisis in Cyprus caused money to flow into Dubai, a safe haven. Property prices commenced to grow again, and real estate was flipped quickly. Investors were buying exotic cars with the proceeds, as evidenced by the line of exotic car showrooms on one commercial avenue in Dubai.
However, «For the last twelve months in Dubai, nobody has been buying property,» Farrow says, and many of the Bugattis, Ferraris, and Lamborghinis in the showroom windows today are on consignment. «Their owners can`t afford the payments on them anymore.»
Funding fleet was lighter when used car values were high – medium-sized rental companies would use a bank loan and a 10% to 20% down payment, with a final balloon payment after three years that would be lodged by the proceeds from selling the car. With today`s lower comebacks, Farrow says the proceeds don`t often cover the balloon payment, forcing some companies to take out cash to pay off the vehicle.
«I`ve had three companies in the last four months asking, ‘What do we do next?`» says Farrow.
Expat Imbalance
Similar to UAE, the populations of Kuwait, Bahrain, and Qatar have high expat ratios with stagnant population growth. The expats come as laborers and middle managers for the region`s construction boom and to work in retail environments. Westerners make up only a fraction of expats; many come from India, Pakistan, Bangladesh, Philippines, and Egypt.
The high number of expats on improvised visas drives monthly rentals and leases. Possessing a car – renewing the registration, servicing, and smog testing it – didn`t make sense. While this is still the case, outright ownership is growing, as dealerships have streamlined car-buying procedures and paperwork, Farrow says.
Yet many expats and locals don`t use credit cards, especially in Saudi Arabia, and that comes with evident problems for rental – some particular to the Middle East. While outright fraud or theft is less of an issue, Saudi Arabia and UAE have instituted a system of crimson light and speed cameras – and violations are lightly tracked electronically to owners, the rental companies. Without a credit card on file, it`s hard to track down renters to pay up.
Unpaid fines prevent the rental company from re-registering the car, but the situation is often more problematic for the violators. Farrow recounts a latest incident in which a rental company took back a large group of leased cars from a construction company, yet many of the company`s expat drivers hadn`t paid their traffic fines. The government holds their visas, and by law had blocked them from leaving the country.
When it comes to expats, Saudi Arabia bucks the norm – its percentage of natives to expats is two to one, with 60% under 25. This has led to a growing request for cars, particularly used ones. «There are youthfull people coming into the market without a lot of money and looking for cheap transport,» Farrow says.
In Saudi Arabia, «the only thing keeping car rental companies reasonably stable is the growth in the population,» Farrow says. «More people are coming of age to drive, which is creating more request.»
A Growth Market?
While the Middle East fights with the fresh economy, one market may be poised to take off. After Saudi Arabia, the 2nd largest economy in the Middle East and North Africa is Iran, which also has the 2nd largest population in the region – about eighty million people.
Rahul Singh of UAE`s Dollar and Thrifty franchise says that the current economic landscape has caused businesses in the region to reset expectations to a «Fresh Normal.»
Iran has a strong tradition of higher education, engineering prowess, and domestic industrial production. After the signing of the nuclear deal this year, the lifting of sanctions is beginning to generate foreign investment and release pent-up request. Since the breakup of the Soviet Union in the 1990s, Iran is the largest market to rejoin global trading.
Auto manufacturing in particular is moving into Iran: PSA Peugeot Citroen has finalized a joint production deal; Mercedes-Benz and Volkswagen are exploring partnerships.
Fresh investments call for related services, including individual transportation – and car rental companies would supply the long-term rentals and leases. Iran has been the single largest importer of up to three-year-old cars from the Middle East and has a tradition of car driving, unlike bicycle and scooter markets such as India. Similar to India, however, many think the rental market will originally develop as cars with drivers, as opposed to self-drive.
Foreign investors are taking a careful treatment to Iran based on the tenuous political situation. Banking needs to sort itself out, Farrow says, as wary large foreign banks are still doing business through accounts in Dubai.
«There is chance, but a lot of reservations still on both sides,» Singh says. «While there has been some progress, we still need to see how things scale politically.»
For Iran, it`s only a question of when. Global brands are in active talks with franchise playmates, with two thousand eighteen as a realistic timeline.
Outlook
While car rental and other service industries process the Middle East`s «fresh normal» of an extended period of low oil prices, the big picture hasn`t switched too much. Expats will still make up the majority of the work force in most Gulf countries. The used car market will proceed to be export based.
Dubai – which grew from a desert backwater twenty years ago into an international business and tourist destination – will proceed to grow. «It`s fairly a draw for people across the world,» Singh says. «It will bounce back.»
Fresh business models are creeping in.
Carsharing could be a growth area in certain markets, Farrow says. In Abu Dhabi, a carsharing service called eKar makes cars available in apartment blocks that serve squad members for Etihad, the city`s airline. Emirates Airlines presents another chance with a larger employee base, and other «free zones» in UAE have 50-story buildings to place carsharing vehicles, as well as near Dubai`s growing metro system.
Uber operates in markets such as Riyadh, Abu Dhabi, and Dubai, and a local competitor, Careem, now operates in twenty four cities. But Singh says, powerful regulation and licensing issues are barriers to growth. Unlike the regular Uber model, licensing requirements in the UAE prohibits individuals to use their vehicle to drive for Uber during their spare time.
Another consequence of hard times is market consolidation. While most Middle Eastern markets have the international car rental brands, there are still large numbers of mom-and-pop companies. «Anyone with a few million dirhams gets into the car rental business with fifty to one hundred cars,» Singh says. «Now such companies will be severely tested to sustain themselves.»
Moreover, says Singh, the current economic landscape has caused businesses and investors to plan for realistic growth. «In the UAE, especially in certain sectors, we`ve been used to very high profit levels over the past several years,» Singh says. «What we were earning was exceptional, benchmarked against similar businesses across the world. Going forward we need to reset our expectations and commence getting used to the ‘Fresh Normal.`»