BACKGROUND

The automotive sector in the Middle East was one of the sectors hit hard by the economic recession, but it has shown strong signs of recovery ever since. 11 Automobile companies were monitored in the UAE and Saudi markets, in September 2009 (BMW, Mercedes, Toyota, Renault, Lexus, Honda, Nissan, Chevrolet, Cadillac, Mazda and Ferrari), with a focus on 3 luxury brands’ coverage (BMW, Mercedes and Lexus).

According to a MENAFN Khaleej Times article, 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. Auto sales in the UAE are expected to rise 5 per cent between 2009 and 2010, according to Dubai Chamber of Commerce. Furthermore, plans for a car production plant in the UAE could help initiate a local automotive manufacturing industry.

The UAE is the fastest growing auto market in the Middle East. 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 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.

According to a Business Monitors International report, Saudi Arabia will be one of the few places in the world where automotive sales will increase in 2009, with BMI forecasting growth of 3.5%.

Reports in the Saudi media indicated a slump in sales in the first few weeks of 2009, but signs of recovery were seen in February, suggesting that the market had passed a low-point. Saudi consumers are more likely to make cash purchases than those in the UAE.

Aside from a relatively favorable economic environment in very difficult circumstances, there are other factors supporting sales growth in 2009, such as restrictions on the age of imported used vehicles.

Consumers are more interested in buying cars based on price rather than prestige; prices will determine the pace of growth. If prices rise by 10% or more, BMI believes that the recovery in sales will be delayed and demand will remain flat or even decline over the year.

MEDIA COVERAGE

BMW achieved the highest amount of coverage in September 2009, followed by Renault, Mercedes, Toyota and Honda. The same pattern followed in terms of the AVE (Advertising Value Equivalent) achieved in the monitored month.

BMW ranked 1st in terms of impressions as well, followed by Renault, Toyota, Mercedes and Honda. While Mercedes came in 3rd place in terms of amount of coverage and AVE achieved, it ranked 4th, outranked by Toyota in terms of impressions.

Renault came in 1st place in terms of newspapers’ coverage size, followed by BMW, Mercedes, Toyota and Honda, while Mercedes came in 1st place in terms of magazines’ coverage size, followed by BMW, Toyota, Chevrolet and Lexus. Renault managed to be from the top 3 in all categories, with the exception of magazines’ coverage size, as it ranked 10th. Mercedes seems to focus more on magazines, as it ranked 1st in this category. Overall, in terms of media coverage the top 3 contenders are BMW, Mercedes and Renault, while Lexus only made it in the top 5 in terms of magazines’ coverage size.

CONTENT ANALYSIS

All 3 automobile companies (BMW, Mercedes and Lexus) achieved a good amount of coverage in September 2009. The messages were highly diversified and covered issues such as launching new models, participating & sponsoring various events, received awards or being praised, as well as corporate news.

BMW’s coverage included its launch of its 760 model in 2010, its participation in Formula One, in the Japanese Grand Prix and Frankfurt Motor Show. BMW was praised as best selling car in the Middle East large luxury segment. It was also described as too efficient. BMW also sponsored the BMW Championship and BMW Oracle Cup. Its coverage featured its launching of BMW X5Sport in the Middle East, its launch of eco-friendly vehicles, and BMW X6. BMW is also to invest 1M Euro until 2010. BMW’s negative coverage was on its struggling in the second annual slide in US luxury car sales, its struggle with its competition with Lexus, and its plans to cut further jobs.

Mercedes’ coverage was on it developing a new S-class hybrid, its deals with MAN in UAE, participation in Frankfurt Motor Show, as well Formula One, launching cars that work on long-life battery, setting up car component manufacturing facility in Abu Dhabi, releasing SLR Stirling Moss, as well as E63 AMG in the Middle East. Mercedes sponsored the World Cup and received the J.D. Power Award. Mercedes’ coverage was also on it offering split view technology and releasing cars with Blue-Tec technology. Its negative coverage was on 65,000 fake parts that were destroyed in Sharjah.

Lexus’ coverage was on it competing in the luxury SUV market, on its LF-ch model being praised, on its 550 dealer shops in China, on its LS460 getting praised, on entering the European market, offering hybrid cars, sponsoring the Lexus Golf Day as well as on its struggle with the 2nd annual slide in US luxury car sales.

CONCLUSION

Auto sales are increasing in both the UAE and KSA. While UAE auto sales are growing faster, it is important to note that this became possible through easier credit facilities and requirements, while in KSA, buyers are buying with cash.

BMW, Renault and Mercedes enjoyed the best coverage in September 2009. Lexus’ coverage on the other hand fell relatively behind. According to PARC for the 2007 Ad spend data, Lexus came in 9th place in the GCC market, followed by BMW in 11th place and Mercedes in the 13th. It seems that Lexus focuses more on advertising while BMW and Mercedes focus more on PR.

The Auto sector is growing, but positive PR along with the reduction/elimination of negative coverage is very important for all brands to maintain a positive image as buyers re-enter the market.