SEMA-Member Companies Explore Selling to Middle East Buyers

SEMA News—August 2013

INTERNATIONAL
By Linda Spencer

The United Arab Emirates and the Middle East Region

41 SEMA-Member Companies Explore the Opportunities and Challenges of Selling Into This Car-Lover’s Paradise

	The SEMA delegation posed for a picture with the staff of Liberty Group. The customization arm of the business, Liberty Motor Sports, has grown, aided by an estimated 25% of new-car buyers opting for some form of customization. Liberty Motor Sports’ core services include new-car upgrades, motorsports vehicle preparation and classic-car restoration.

More than 160 pre-vetted buyers from nine countries met with 41 SEMA-member exhibitors at the 2013 SEMA Middle East Business Development Conference. Buyers from the six Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates [UAE]), from Lebanon, Egypt and Jordan traveled to the UAE to meet with manufacturers of parts for those engaged in car collecting, off-roading and motorsports and those seeking upgrades for street-performance vehicles.

The U.S. Department of Commerce partnered with SEMA and the U.S. embassies in Saudi Arabia, Kuwait, Qatar and Jordan to lead delegations of buyers to the 2013 SEMA event. U.S. Ambassador to the United Arab Emirates Michael Corbin visited the SEMA Hall at the Middle East Motor Tuning Show (MEMTS). In addition, Liz Couch from the International Trade Administration’s auto team at the U.S. Department of Commerce headquarters and representatives from the U.S. Consulate in Dubai participated in this year’s event, which featured more than 80 executives from the 41 SEMA companies.

SEMA delegation members had the opportunity to exhibit at MEMTS, a trade and consumer show at the Sharjah Expo Centre. The delegation also visited leading retailers and installers in Dubai and the neighboring emirate of Sharjah as well as spending an evening networking with buyers at Rabbiah Farm, which is owned by Sheikh Khalid Abdul Aziz Al Qasimi, the chairman of the Liberty Group, one of the largest GM dealers in the world.

The SEMA companies that attended were among a growing number of members that are actively pursuing overseas customers. This often-overlooked strategy to growing a firm’s bottom line can be a very smart move, as 95% of the world’s customers are located beyond U.S. borders. By diversifying, SEMA members can better position themselves for future U.S. economic downturns.

Getting to know fellow SEMA members seeking to sell into a market has always been an added benefit of the association’s international trips. Pictured here from left to right are Ron Delgado, president of Injen Technology; Sean Holly, president and general manager of Crane Cams; Kyle Fickler, vice president of sales for Weld Racing; and Ed Rossi, vice president of sales for Injen Technology. All three companies have participated in the SEMA China Business Development program. The next trip will be held September 11–14.

“The Middle East has tremendous upside for the performance market,” said Rick Trudo, CEO of Florida-based SCT Performance. “We have seen eight-to-one growth over our two years working with SEMA at this event. It plays a big part in our international growth strategy, as do China and Brazil. It helps take the potential inconsistency out of the U.S. market and gives us a strong offshoot to sell into.”

In addition to identifying and prioritizing overseas markets in which to organize business-development programs, SEMA relies on a few other measures. First is the level of passion for vehicles and customizing. For example, do motorists have a culture (or is one ripe for developing) for personalizing and improving the look and/or performance of their vehicles? Second, are there sufficient numbers of consumers in the market who have the funds to customize their vehicles? And third, is there a receptive and forward-thinking government looking to develop the automotive specialty-equipment industry and gain the benefits from this potentially powerful economic engine that generates needed jobs and tax income?

The UAE has grown within less than half a century to become a modern multi-cultural cosmopolitan center. It’s one of the world’s fastest-growing automotive markets coupled with open borders and an open economy, high per-capita income, a passion for vehicle customization, a desire for U.S. products and a love for light trucks. Below are some of the unique features of the market.

High Degree of Customization

“Automotive styling in the Middle East is a confluence of influences from around the globe,” said David Borla, sales and marketing manager for Borla Performance. “Whether it’s musclecars, high-end exotics, Jeeps, pickups, SUVs, luxury sedans or sport compacts, you will find a cross section of the world’s finest automotive offerings. But it doesn’t stop there. Personalization is just as important as the platforms themselves, and there is a pervasive culture of tailoring vehicles to meet individual specifications, needs or preferences.

“The conditions in the Middle East have created a ‘perfect storm’ that promotes the growth and prosperity of the automotive aftermarket. Beyond the affluence and brand consciousness you see on the surface, there is a growing infrastructure of distribution and service that makes it easy for enthusiasts to buy, install and maintain aftermarket parts. Combine that with great roads and what seems like infinite sand dunes, and you have a giant playground for people who love to play with cars.”

In a recent blog, Audi Middle East Managing Director Trevor Hill said that nearly 50% of the cars sold in the region exhibit some form of individualization, and the Liberty Group, which owns Liberty Motor Sports (LMS), engages in new-car upgrades, motorsports vehicle preparation and classic-car restoration. LMS said that, from its experience, 25% of new-car buyers opted for some form of customization.

High Income

Following the exhibition, SEMA exhibitors and buyers from throughout the region participated in a reception. Pictured from left are: Marwan Al Mashgouni, marketing and protocol manager of Expo Centre Sharjah; Saeed Al Marzouqi, owner and CEO of Top Speed Performance; Mutaz Osman, director of operations and security; Roman Gavrilin, project manager of MEMTS; Saif Al Midfa, director general of Expo Centre Sharjah; Bill Miller, SEMA senior vice president of operations; Jim Cozzie, director of new business development for RideTech; Linda Spencer, SEMA director of international and government relations; Peter MacGillivray, SEMA vice president of communications and events; Wade Kawasaki, executive vice president of Coker Group; Nasser Al Taqi, managing partner of Dr. Custom; and Bob Bannerman, commercial attaché of the U.S. consulate in Dubai.

The UAE is one of the richest countries in the world, ranking sixth in terms of per-capita income, according to Forbes magazine, and is one slot ahead of the United States. Audi’s Trevor Hill said in a recent interview in local blog “7 Days” that “…there is a population here that has some money, and they are spending some of that money on cars. And there is also a very strong car culture here and also a multi-car-per-family culture. There are a lot of single customers here who have three, four, five cars—which you would never experience in Europe. Some customers would like to have one of each of various types of cars, he said, such as an SUV, a sedan and a high-powered sports car.”

“We certainly see potential for our products in this market,” said trip participant Eric Blackburn. “We specialize in Jeep and FJ Cruiser accessories, and both vehicles are gaining popularity in the region. Most customers have a relatively large disposable income, and the upper-middle class to upper class are extremely wealthy and able to purchase the best money can buy.”

Kevin Floody of K&N agreed, noting that many car owners are obviously very willing to spend money on vehicle modifications and that there is a demand for quality aftermarket automotive products.

Quickly Growing Economy and Quickly Growing Vehicle Market

The UAE’s economic growth is back on track after the global economic slowdown of 2009 and 2010. Last month, Dubai’s Roads and Transport Authority revealed that, with the high ratio of cars per household, 1.13 million vehicles were registered in the emirate by the end of 2012—a figure that is up by more than 106,000 vehicles since 2010.

The automotive specialty-equipment market also enjoyed similar growth. The wholesalers and retailers that the SEMA group met were quite optimistic about the growth of the market over the next three to five years.

“We are glad to say the market is growing,” said MEMTS organizer Roman Gavrilin. “More new companies have opened their doors across the country, and many new manufacturers from abroad came to the UAE after seeing tremendous perspectives for expanding. The demand for car modification in the country is fueled in part by the country’s high economic growth. The demand for performance tuning and sport vehicles is steady, with good forecasts for the future.”

Sean Holly (far right), president of Crane Cams, talked with Abu Dhabi-based buyers.

Illinois-based HP Tuners was a first-time participant in a SEMA trip abroad. The HP Tuner staff—Jay Parson (second right), sales and marketing representative, and Nhut Tong (far right), an engineer from HP Tuners—met with local buyers.

Representatives of first-time exhibitor Itek Products talked to buyers from Saudi Arabia. Facing the camera is the firm’s CEO, Tony Suarez.

Positive Perception of U.S. Products

SEMA’s Vice President of Communications and Events Peter MacGillivray (center) cut the ribbon to officially open the MEMTS. On his immediate left was Sheikh Salem Bin Abdulrahman Al Qassimi, director of the Office of His Highness the Ruler of Sharjah, and on his right was Ahmed Al Midfa, chairman of Sharjah Chamber of Commerce and Industry. To the right of Ahmed Al Midfa was Saif Al Midfa, director general of the Sharjah Expo Center, and on the far right was Roman Gavrilin, project manager of the MEMTS. SEMA Senior Vice President of Operations Bill Miller is to the left of Sheikh Salem.

In a nod to the popularity of U.S. culture in the region as well as the recognition that the UAE has a strong enthusiast base, Fast and Furious 7, to be directed by James Wan, will start shooting in September in the UAE, with a release to theaters expected in July 2014. In addition, TV shows such as TLC’s “Overhaulin’,” MTV’s “Pimp My Ride” and Universal Studio’s previous The Fast and the Furious films have played an important role in raising awareness of U.S. products and culture.

U.S. products are well-received in the UAE. Given the region’s open economy, not only are U.S.-branded vehicles making their way to the country and region, but it is also an important hub for vehicles built to U.S. specs. According to the American Policy Council—a U.S.-based policy organization for Ford, Chrysler and GM—the GCC region is one of the most important export destinations for U.S.-built and certified motor vehicles. The GCC is the second-largest U.S. passenger vehicle export market.

Brand awareness for U.S. products is also strong. Coverking CEO Steve Gupta, who was participating in his first trip to the Middle East with SEMA, said that the market is full of automotive enthusiasts, and the buyers met by the SEMA group seemed to know most U.S. brands.

Said SCT’s Trudo: “With American brands being so big in the region and the passionate interest that has been shown, we have seen a huge growth from tuners to dynos sold in the region. The UAE loves American brands and is passionate in displaying ‘Made in America.’ It sells in the UAE and throughout the
Middle East.”

In fact, research shows that the UAE is a hub for all things American. In a March 2013 report, the U.S. Congressional Research Service, the official research arm of the U.S. Congress, said that U.S. trade with the UAE is a significant issue because the UAE is the largest market for U.S. exports to the Middle East. In 2012, the report said, U.S. firms exported nearly $22 billion worth of goods to the UAE. More than 1,000 U.S. companies have offices there, and there are 60,000 Americans working in the UAE.

Market for Old Cars

	Coverking’s Bart Roomans (right rear) and Steve Gupta (right front) meet with a potential buyer.

The market for classic cars is very strong. Numerous well-attended classic-car shows highlight just a fraction of the amazing U.S. musclecars and hot rods in local private collections.

Read the complete story, "The United Arab Emirates and the Middle East Region," in the August 2013 issue of SEMA News.