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Sales of greener vehicles in Dubai look set to rise in the coming years as the government steps up its bid to reduce the emirate’s carbon footprint.
The introduction of quotas for hybrid cars in government vehicle fleets, combined with campaigns aimed at encouraging Dubai’s motorists to switch to environmentally friendly automobiles, is expected to open up new markets for the industry.
More broadly, auto sales should also receive a boost from the positive economic forecasts in the UAE budget, which put GDP growth at around 3.6 percent in the coming year, up from an estimated 3.3 percent in 2016. The luxury vehicle segment, in particular, looks set to deliver another solid performance.
With a target of cutting emissions by 16 percent by the end of the decade looming, Dubai’s government is accelerating its plans to boost the number of vehicles in public service that make use of new technology.
Announcing its campaign in mid-July, the government said that by 2020 at least 10 percent of vehicles in its larger fleets would be hybrid or electric models. Officials will be hoping that national efforts to lead by example will encourage the private sector to follow suit.
A separate plan under consideration by the Road Transport Authority (RTA) aims to bring the number of hybrid taxis on Dubai’s roads to 4750, or 50 percent of the total fleet, by 2021. At present, just under 150 of the taxis on Dubai’s roads are hybrid.
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The RTA is especially keen to utilise electric vehicles for public transport as part of its campaign to reduce carbon emissions.
In mid-November Ahmad Hashem Behroozian, CEO of the RTA’s Licensing Agency, said the authority was also considering introducing hydrogen-powered cars into the emirate’s taxi fleet. His comments followed the launch in Dubai of the Toyota Mirai, which uses hydrogen cell technology.
State utilities provider, the Dubai Electricity and Water Authority, is playing a supporting role in the emirate’s move towards greener motoring, having been tasked with installing charging stations for electric vehicles.
More than 100 stations are already up and running under the government’s Green Charger initiative, with additional facilities set to extend access across the emirate.
Power still a pull
While the alternative power segment has potential, the appeal of standard models – including luxury cars – remains strong, buoyed by both low running costs and cultural preferences.
Indeed, petrol prices in Dubai are still well below global averages, despite tariff increases. According to the UAE Ministry of Energy, petrol prices for January 2017 will be Dh1.94 ($0.53) per litre for diesel, compared to a global average of $0.86 per litre as of the end of 2016.
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However, some industry players, including Graham Turner, CEO of Al Ghandi Auto Group, are beginning to spot changes in consumer preferences, with technological advances helping to galvanise new trends.
“While the UAE is a market that has historically favoured five- and six-litre engines, there has been a recent shift downwards, as technology has made smaller-sized engines more powerful,” he told OBG.
Luxury segment going strong
Although sales across some segments of the market have slipped on the back of slower growth in 2016, key niche markets are continuing to deliver solid performances. Sales of high-end SUVs and sports cars have remained strong throughout the year, with any downshift in demand negligible.
“The premium segment has outperformed the non-premium segment over the past year,” Johannes Siebert, managing director of BMW Group Middle East, told OBG. “The former saw a decline of 13 percent, whereas the latter saw closer to 22 percent.”
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Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…
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