Boston, MA -- (SBWIRE) -- 07/25/2013 -- The overall outlook for the UAE's auto sector is positive, with demand for new commercial vehicles set to be bolstered by continuing investment in infrastructure projects and improvements to public transport networks. Government spending, particularly aimed at the non-oil sector in Abu Dhabi, is driving construction projects.

In 2012, new car sales in UAE rose by 27.4%, to reach just over 310,000 units. Looking forward, BMI retains an optimistic outlook on new vehicle sales, forecasting further growth of 33.7% over the 2013-17 period, to result in over 470,000 sales by 2017.

As with other Gulf states, UAE has positive growth potential in both the volume and high-end segments. This was borne out by the news in June 2013 that German automaker Porsche's Abu Dhabi dealership, Ali & Sons, is to add a third showroom to its operations in the region. Expected to cost US$36.2mn, the new showroom will be based in Rawdhat, where it will display 18 vehicles, and will be opened to the public in 2015, according to Zawya. The dealership is building the extra 2,200 sq2 metre floor as its business has exceeded expectations in recent years, including sales of 1,056 units in 2012.

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Other recent bullish indications from the new vehicle sales market include VW's local dealership Al Nabooda Automobiles selling 900 Volkswagen (VW) vehicles over Q113, reportedly a new record for the German automaker in Dubai and the northern Emirates and Renault's local dealer Arabian Automobiles registering a 49% annual rise in sales of Renault cars for 4M13.

Underpinning our upbeat stance on the outlook for auto sales is BMI's positive view on the UAE economy, which we see expanding by 3.3% in real terms in 2013, rising to 3.8% in 2014. Encouragingly for auto sector demand, both consumer and business sentiment appear to have turned a corner, with prices across real estate and equity markets having started to head sharply higher in recent months, which bodes well for the prospects for a positive wealth effect.

One slight downside risk to our sales forecasts is posed by rising inflation, which BMI sees rising to an annual average of 2.6% in 2013, up from 0.6% in 2011. This could see the Central Bank of the UAE look to move rates up from their current record low of 1% which, in turn, could impact on those UAE residents requiring loans to make vehicle purchases.

However, the overall outlook for the sector is positive, with demand for new commercial vehicles set to be bolstered by ongoing investments in infrastructure projects and improvements to public transport networks. Government spending, particularly aimed at the non-oil sector in Abu Dhabi, is driving construction projects. With a view to tap this growth potential, Chinese truck maker Beiqi Foton Motor launched its full range of light, medium and heavy duty trucks and special-purpose vehicles in Dubai in January 2013.

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