The United Arab Emirates (UAE) autos market faces a tough 2009 as it feels the impact of the global economic slowdown, according to analysts at Business Monitor International (BMI).

This will bring an end to the robust growth the UAE has registered in recent years. Nevertheless, there are encouraging signs in the market that suggest a recovery may not be far off, BMI says.

Dealers in the UAE are facing unsold stock and dwindling profit margins as consumers pull back. Consequently, BMW has revised its UAE sales forecast from 2.9% growth to a contraction of 8.5% this year.

BMI foresees sales of around 324,900 units.

However, even in the current global economic scenario, manufacturers continue to focus their attention on the Middle East, which has been one of the more resilient markets for autos when compared with North America and Europe.

In May, French automaker Renault launched its first crossover sports utility vehicle (SUV), the Koleos, in the country. The vehicle is aimed at the segment in the Gulf Co-operation Council (GCC). Meanwhile, General Motors (GM) said in April that its decision to cut back on its global dealer network would not affect distributors in the Gulf and Middle East.

While a sales contraction is on the cards this year, BMI believes that the market will rebound in 2010. It says it is encouraged by signs that the credit situation is improving.

In addition to offering the opportunity to lease vehicles, dealers are teaming up with banks to provide autos loans to buyers who wouldn't normally be able to qualify for a loan.

In April, HSBC Middle East reportedly slashed by half the minimum salary requirement for autos loans. Likewise, Emirates NBD, the biggest consumer bank in the UAE, cuts its minimum salary requirement for autos loans.

And while new car sales may be slowing, the UAE remains a robust market for luxury sales. Sales in the segment have not been immune from the downturn. In Q109, BMW Middle East posted a 9% fall in sales. But regional sales rose and Marketing Director James Crichton said the drop was in line with its estimates and that the company remains optimistic about the region's growth. The largest market during the period was Dubai with 772 unit sales, followed by Abu Dhabi on 589 units. Crichton made reference to the strong 'underlying fundamentals' of the Middle East's luxury segment, reflected in sales for BMW's new X6 Sports Activity coupé and 7-Series sedan.

Meanwhile, emirates like Abu Dhabi are gaining a foothold in the international autos sector by buying stakes in leading car companies.

Aabar Investments, an Abu Dhabi investment fund, bought a 9.1% stake in Daimler in March. It agreed to invest EUR1.95bn in the automaker, making it the largest shareholder in the group. In addition to producing luxury Mercedes-Benz vehicles, Daimler manufacturers Smart cars, and the two companies intend to team up to develop electric vehicles (EVs). Under the agreement, an industry training centre will also be established in Abu Dhabi.

BMI remains optimistic over its forecast period, which concludes at end-2013. It says it expects the recovery to begin next year and accelerate as growth picks up. Sales should reach 422,145 units, an increase of 18.9% over 2008 levels. Over the period, BMI expects to see some consolidation within dealerships, with smaller firms at risk of going out of business and larger dealerships taking on their sole distribution rights.

More: United Arab Emirates Autos Report Q3 2009 (download)