SEMA News—August 2013
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
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.
“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.
|Max Stutz (left), sales representative for Ohio-based Avery Dennison, shakes hands with Sheikh Salem Bin Abdulrahman Al Qassimi (right), director of the Office of His Highness the Ruler of Sharjah. Also pictured is Philip Novac (center), Avery Dennison’s director of marketing and business development.||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.|
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.”
Positive Perception of U.S. Products
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
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.
|Forty-one SEMA members exhibited in the SEMA Hall at the 2013 SEMA Middle East event, including Weld Racing and Livernois Motorsports.||David Borla (far left), sales and marketing manager for Borla Performance, provided details on his company’s products to U.S. Ambassador Michael Corbin (dark suit) and Sheikh Salem Bin Abdulrahman Al Qassimi (front, center), director of the Office of His Highness the Ruler of Sharjah.
||Representatives of first-time exhibitor Itek Products talked to buyers from Saudi Arabia. Facing the camera is the firm’s CEO, Tony Suarez.|
Market for Old Cars
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.
The newest trend is the growing number of shops opening in the UAE to restore and upgrade classic cars. With this new option, there is strong and increasing demand for products.
Consumers have long been able to register these classic cars in Sharjah, the emirate bordering Dubai to the north. As of late 2012, motorists can also obtain classic-car plates, although the program there is more limited and is a bit cumbersome.
“With the expansion of their less-restrictive vintage registration and licensing programs, we see continued acceleration in this already rapidly growing and passionate classic-car market,” said Wade Kawasaki, executive vice president of the Coker Group.
“Coker Tire is presently setting up our first container of vintage tires and wheels into this area and looks forward to the results of having product on the ground.”
|Livernois Motorsports was one of 41 companies exhibiting in the SEMA hall at MEMTS. The company talked with 160 buyers from throughout the Middle East. Pictured from the left (in black shirts) are Dan Millen and Rick LeBlanc, representatives of Livernois in Dearborn Heights, Michigan.||Scott Sobie (in dark colored shirt), sales manager of Mustang Dyno, talked with buyers from Abu Dhabi.||Representatives of first-time exhibitor Itek Products talked to buyers from Saudi Arabia. Facing the camera is the firm’s CEO, Tony Suarez.|
Popularity of Light Trucks
Similar to the market in the United States, light trucks are extremely popular in the Middle East. In fact, nearly half of the passenger vehicles on the roads in the Middle East are light trucks, with the Toyota Land Cruiser, Nissan Patrol, Toyota FJ Cruiser, Ford Explorer and Jeep among the top-selling SUVs. Top pickups include the Toyota HiLux, Chevrolet Silverado and Ford F-Series, among others.
Weekending in the vast desert of the UAE is a popular pastime in the country and the region. The empty quarter in the Liwa desert provides the most wide open space for so-called “sand bashing,” but off-roading in the sand and through the wadis (dry river beds) is extremely popular in the open desert throughout the country.
Peter Marr, president of Owens Classic International, said that driving off-road for recreation is extremely popular and growing, and hobbyists are good customers for products that enhance the functionality of vehicles on unpaved roads. Eric Blackburn of Oregon-based Warrior Products said that the terrain provides a massive off-road playground for enthusiasts to enjoy and explore.
Building Product for the Market
The dusty, desert conditions and the extreme heat also present opportunities for SEMA-member companies that take the time to learn about the local market and to provide product based on its unique needs. There is a concentration of vehicles used in the sand, and delivering what that demands is a challenge said Alex Borla, CEO of Borla Performance.
“The UAE and GCC countries are located in an extreme environment,” said Jeff Victer of Prolong Super Lubricants. He said that his products are being well received in the market, given that they offer protection and performance in the extreme conditions, and K&N’s Floody has witnessed similar success with his company’s products.
“The Middle East market is definitely a great opportunity for K&N because of the vehicle mix and the environment,” he said. “Many Middle Eastern vehicle owners go through original-equipment replacement filters much more quickly than in any other market because of how dusty the conditions are.” He added that performance-minded consumers are plentiful. With the wide range of K&N performance intake kits, the commonality of the vehicles and the willingness by consumers to spend money, the region is even more attractive for K&N.
Following the first of the two SEMA Middle East trips that Royal Purple has participated in, company executive David Canitz said that the Middle East has great sales potential for the company due to its good economy, a good American vehicle market and rough ambient operating conditions in which vehicles need the superior performance of a high-end lubricant.
There is a great diversity of vehicles in the UAE. SEMA members selling products for vehicles in the United States might want to consider expanding the breadth of their offerings to vehicles in the UAE. For example, trucks such as the HiLux and new Ford Ranger T6 are extremely popular in the UAE and around the world but are not sold in the United States. SEMA, in cooperation with the U.S. Department of Commerce, has imported one of each of these vehicles to the United States in order for members to measure them and create export-ready products.
“RideTech’s participation in the recent SEMA Middle East Trade Conference quantified our views of the region as a new, robust market not only for our current products, but also as a good opportunity to develop products specifically for the market in the UAE,” said Jim Cozzie, director of new-business development for suspension manufacturer RideTech. “Considering the high vehicle count of U.S. brands already in use there, it only makes good business sense for RideTech to invest the time and resources to grow this as a market for us.”
The UAE is well positioned as an “oasis” for the entire region, said David Borla. “Consumers travel from a large radius to find quality, branded products—automotive and otherwise—making the UAE a major, global hub for all types of commerce,” he said.
Historically, the UAE has been recognized as a trading nation, re-exporting product not only to the countries that make up the GCC, but also to numerous other Arab countries as well as to the Indian subcontinent and East Africa. The UAE is the third most important re-export center in the world after Hong Kong and Singapore, aided by its first-rate infrastructure and policies—including Jebel Ali, the world’s largest man-made port, and 20 free-trade zones.
“Reflecting the country’s role as a major regional commercial center, a significant portion of the UAE’s import volume is ultimately re-exported,” according to the U.S. Department of Commerce in a
SEMA MemberCompanies Exhibitingat the 2013 SEMA Middle East Business Development Conference