The
rapid industrialisation and modernisation currently sweeping
through many African countries has resulted in an increased
demand for capital goods such as machinery, lubricants,
spare parts, ball bearings and other mechanical goods and
accessories. The market for automobile spare parts, in particular,
has been an attractive sector for UAE-based enterprises,
who have emerged as the leading supplier of these goods
to many countries in East, Central and Southern Africa.
The UAE has long been known as a major supplier of automobile
spare parts both within the Gulf region as well as for Iran,
CIS, Indian sub-continent and Africa. After witnessing a
depression recently, the automobile and spare parts industry
in the country has once gain recovered to its optimum level.
However, the increase in demand for quality spare parts
has encouraged parallel imports into the country forcing
leading automobile distributors and spare part companies
to start a full-blooded campaign against illegal importers
who operate from neighbouring countries, particularly across
the border in Oman. As a result of illegal imports into
the UAE, the major players in the local market have combined
together to curb the inflow of excessive supply of spare
parts through illegal channels.
It has been estimated that almost 30 per
cent of the demand for auto spare parts is being fed by
parallel imports from neighbouring countries. These pirated
goods are preferred by buyers as they are offered at heavily
discounted prices. These illegal operators are able to
beat the local agents and distributors as they survive
on low profit margins and high volumes. They also do not
pass on import tariffs and other additional expenses on
to their customers in order to maintain their low prices.
The rise of a sizable second-hand spare
parts market has posed a further threat to UAE-based spare
parts dealers. This lucrative market has registered a
substantial growth in the last five years mainly because
of the rising demand from East African countries and CIS.
Though not all second-hand spare parts sellers in Dubai
or Sharjah can provide the full range of used parts for
all car models, but these outlets are capable of providing
nearly 90 per cent of such parts. In fact, some of the
second-hand spare parts outlets in Sharjah are reportedly
selling parts of even 1998 models at less than half the
price of genuine parts. As a result, the business of second-hand
spare parts has developed into a full-fledged multi-million
dollar industry involving more than 100 small and medium-sized
enterprises spread throughout the country. Earlier Dubai
was considered the main source for second-hand spare parts
but over the last few years the market has shifted to
Sharjah, mainly because of relatively lower overhead expenses.
Many second-hand spare part outlets in Sharjah deal in
used used engines which are imported from Japan and then
re-exported to many Asian and African countries. There
is a huge demand for such goods in East African countries
of Uganda, Kenya and Tanzania as well as other countries
like Russia, India, Egypt, Iran and Pakistan.
Most
of the second-hand spare parts are sourced from damaged
cars sold by insurance companies at throwaway prices and
the rest coming from police auctions. Most buyers prefer
to buy these used parts because they are genuine and are
often in good condition. While a major portion of used
parts are sold in the UAE market itself, almost the entire
stock of imported used engines is re-exported. Used engines
are in great demand in many African countries which have
a big market for re-conditioned automobiles.
It is, therefore, little wonder that an
increasing number of African businessmen are seen purchasing
their requirements from one of the many second-hand auto
spare parts outlets in Dubai and Sharjah. "I come
here to purchase used spare parts because the prices in
Dubai are one of the cheapest in the world. As a result,
I am able to make a neat profit for myself when I sell
these goods back home," said Joseph Samara, a spare
parts dealer from Nairobi who was in Dubai recently to
buy spare parts worth $20,000 for selling in Kenya. "In
addition to auto spare parts I would also be purchasing
low-priced car and truck tyres (made in China) for selling
in the local market in Nairobi," he said.
Automobile
Spare Parts
THE
MARKET IN AFRICA
Most
of the African buyers are buying substantial quantities
of automotive batteries, tyres, spare parts, ball bearings,
water pumps and a host of electronic goods from Dubai
for selling them at a profit in their own countries. "The
African customers price-sensitive - they are looking for
low priced goods and are not much concerned about the
quality aspect," says Ahmed of Popular Tyres Trading,
one of the largest stockists of tyres, tubes and batteries
in the UAE. "Chinese tyres are in great demand in
African markets as they are cheap and provide excellent
value for money," he says.
With price taking the upper hand over quality for many
buyers, the market for substandard spare parts will always
exist. This is a demand that many manufacturers and dealers
are all too keen to satisfy. While some of the cheaper
spares are imported through the proper channels, there
is also a significant area of parallel imports of spare
parts. Illegal imports from neighbouring countries have
been increasing at an alarming rate since 1991 when imports
grew from Dhs 13 million to Dhs 51 million in 1994. A
consequence of such imports is loss of income, loss of
business, loss of reputation and credibility and deterioration
of the brand image. This not only deprives the government
of much needed income but also gives the illegal importer
an unfair pricing advantage over the authorised agent.
The
used spare parts market in the UAE is as old as that of
automobiles. In the last ten years, it has become a full-fledged
multi-million dirham business involving a large number
of small and large enterprises spread all over the country.
Many such outlets also deal in used engines which they
import from Japan and then re-export to many African and
Asian countries, including Russia, India, Egypt, Iran
and Pakistan. Second hand spare parts normally come from
damaged cars sold by insurance companies and the rest
from police auctions. These agents sell mechanical parts
at 25 per cent of the price of new genuine parts but the
body parts, which are in more demand, are often sold at
around half the price of new ones. The rates, however,
vary from part-to-part subject to the condition of the
spare and the availability of that part in the market.
Dealers
of the genuine spares say that they don’t feel any
threat from the used spare parts market simply because
new genuine parts are purchased by only those who can
afford them and more particular about the trouble-free
running of their cars. Some of the spare parts dealers
consider used parts as direct competition to duplicate
parts because of the price margin between the two are
close than new genuine parts. People prefer buying used
spare parts because they are genuine and are often in
good condition. Every spare parts outlet may not provide
the full range of used parts of all car models but together
the market is capable of providing nearly 90 per cent
of such parts. The majority of second hand spares end
up in the local UAE market, with customers coming from
nearby GCC states. On the other hand, almost the entire
stock of imported used engines is re-exported.
Used
engines are in good demand in many African and Asian countries,
especially those with big re-conditioned car markets.
The diversified range of used mechanical and body parts
of cars and engines has brought this business parallel
to genuine and non-genuine new spare parts businesses
as it offers big variety at affordable prices. Dubai has
rightly developed a reputation as being a buyer’s
market. a glance at the prices of various products confirms
that no other place in the Middle East provides such a
variety of goods at such low prices.
The
decisive factor is that over the decades, Dubai has developed
a substantial community of retailers, a sophisticated
import system and substantial warehousing for stock. This
has lead to the emergence of a keenly competitive market
that ensures that prices in Dubai are as much as 10 to
15 per cent lower than in neighbouring markets. “Dubai
continues to be number one for buying anything from second
hand cars to automobile spare parts and ballbearings,”
says Pradeep Gupta of Ameeco Marketing, a leading supplier
of ball and roller bearings. Analysts say sales of automobile
spare parts and accessories in the Gulf has risen by 20-25
per cent in 1997 despite the sharp oil price fall in the
year. Several reasons are cited for this development.
One
of the most extraordinary new trends in the UAE in the
1990s has been the explosion in the number of visitors
from the republics of the former Soviet Union lured by
the many ways money can be made in the Gulf. Enterprising
Russians have been travelling to Dubai on specially-chartered
flights to buy as many products as they can carry for
re-sale at huge profits at home. An estimated 100,000
tourists from the former Soviet republics travel to
the UAE each year. Each visitor is estimated to spend
a minimum of $10,000 in local shops. More than a quarter
of this goes on automobile spare parts and related products.
As the spare parts trade to Africa gains in stature, there
is bound to be new demands from within the African market.
The UAE, with its strategic location and its well established
distribution network, can reap rich dividends by catering
to the increasing demand for automobile spares, ball bearings
and lubricants in the fast developing markets of Africa.
EVENT ANNOUNCEMENT
The Autoparts South Africa Exhibition is being held in Durban between 24-26 July, 2008 at the Durban Exhibition Centre, South Africa. The event will attract buyers, importers, distributors from all across Africa. Global suppliers of automobile parts and accessories can book a stall at theis premier exhibition.
Business
Contacts
SUPPLIERS
OF AUTOMOBILE SPARE PARTS IN DUBAI
Bagader
Tyres & Batteries
Popular
Tyres & Batteries
Zafco
Trading (Siam Tyres, Trane Batteries)
Parts
International
Al
Shirawi Enterprises (Agents for Scania
Trucks)
Al
Tawasul Truck Spare Parts Co (Iveco
& Mercedes Truck
Parts)
ADNOC
Lube Oil
KTK
German Spare Parts
Abdul
Hadi Spare Parts
