by CDK Global | 08/01/2018

What are the unique challenges faced by automotive retailers in the Middle East?

The Middle East is home to some of the largest car dealerships in the world, with Dubai hosting both Bentley and Lamborghini’s biggest showrooms globally. For many years, sales were booming in the region, but now falling oil prices in GCC (Gulf Cooperation Council) countries is affecting consumer confidence and new car sales are down 25-30% in some member states.

Despite this, the volume of vehicles sold by individual dealerships in the Middle East is still far greater than the UK, with some dealers selling around 300,000 cars per year. These figures are boosted because dealers in the Middle East are also importers and distributors - in Saudi Arabia, for example, Al Jazirah Vehicle Agency is the importer for Ford for the entire country.

The need for efficiency

Due to the volume of sales and subsequent aftersales opportunities, dealerships have three- to four-months’ supply of vehicles and parts, all ordered direct from the factory. Issues therefore arise if sales drop - dealers are faced not only with inventory and over-supply problems, but also a much bigger problem – a lack of space.

This problem is further amplified by the requirement for constant stock rotation. Imagine, for example, having to move 10,000 cars at the compound - this is a common problem for dealers who need to move thousands of cars every week to ensure tyres are rotated and not damaged by heat.

Additional issues with space can result from aftersales and workshop activities – in particular, services – which are generally only pre-booked 50% of the time. This can cause chaos at dealerships at the 8am drop-off time, especially for larger workshops that are processing 1,000 customer services a day. To accommodate this demand, some dealerships operate huge workshops with up to 300 servicing bays.

Using smart logistics

To manage the huge logistical challenges, dealerships are using contact centres to issue service reminders and encouraging customers to pre-book appointments. CDK Global is working with a number of dealers in the region to help set up customer contact processes and find greater efficiencies in inventory management.

A new accounting system has also been created to help deal with the unique challenges in the region, along with adaptions of showroom processes, marketing campaign functions and CRM derived from Autoline Drive modules honed in other markets.

Mobile technology is also becoming increasingly popular in Middle East dealerships, with one of the leading Ferrari retailers in the region offering a fully mobile showroom, completely free of desks and computers with staff carry out all customer facing activities on tablet devices.

The unique challenges in the Middle Eastern market are forcing retailers to focus more of their time on customer experience, aftersales marketing and embracing new technology. They need to adapt fast though – the new VAT laws that came into effect in January 2018, creating even more uncertainty for vehicle sales in the region.