With a larger swathe of the Middle East in the grip of internecine conflict, global automotive majors are scrambling to come up with alternatives to limit the dent on their regional operations. While Syria has been a lost market for some time now, the more recent flare up in Iraq and the Kurdish region — and the likelihood of stiffer military ripostes from the US and allies — has auto majors working on the defensive strategies.
Jan-Hendrik Schmitt, Audi Middle East’s Sales Director, stated, “Supply to Iraq is on hold at the current time and Audi Middle East is working to support our dealer-partner during this difficult time and until the situation improves.”
Those shipments meant for Iraq are now being diverted to other markets “for the foreseeable future”. This is where the continuing upturn in the Gulf’s new-car sales will play a prominent role in any plans by auto companies to offset the loss of Iraq.
In Audi’s case, the diverting of shipments from Iraq will “fulfill the increasing demand our model range in other countries,” said Schmitt. “We reported an 11 per cent increase on sales for the half-year and with new models such as the A8 L and the A3 Sedan launched, our sales potential is very healthy for the rest of 2014.”
But the loss of Iraq and that of Arbil — a market that many had seen as one of the growth markets for the medium-term with massive investments on infrastructure and allied sectors — will still be a big loss in the interim. More so as it was felt by many in the industry that year-on-year sales growth would stabilize in most of the Gulf after going through robust double-digit highs in the last three years.
“Ford is watching the situation closely... The crisis has severely impacted our business,” said Jim Benintende, President of Ford Middle East and Africa.
In recent years, nearly all of the global auto brands managed to build up some sort of representation in Arbil, while simultaneously working on their supply lines to feed networks in Iraq. The expectation was both markets would be the new pivots in scaling up regional unit sales for the auto industry.
BMW Group Middle East now has directives in place that disallow its employees from travelling to Iraq. Interestingly enough, BMW sales in Iraq was actually up 4 per cent in the January to August timeframe. Obviously, much of that was front-ended in the initial months of the year and before the conflict swept through a major part of the country.
For the foreseeable future, the auto companies will concentrate on squeezing out optimum growth from the Gulf markets. The UAE remains a haven of growth, with Ford MEA confirming that its “best growth potential in the near term will come from Saudi Arabia and the UAE.
In the case of BMW group, the UAE accounted for 54 per cent of the 20,446 units sold in the region between January to August.