Boston, MA -- (SBWIRE) -- 10/31/2013 -- Over H113, UAE new car sales were up by a reported 12% y-o-y, at 166,290 units. This leaves the country well on course to hit BMI's forecast of 14% growth for the full year. Looking forward, BMI retains an optimistic outlook on new vehicle sales, forecasting further growth of 33.7% over the 2013-17 period.

Underpinning our upbeat stance is BMI's positive view on the UAE economy, which we see expanding by 3.2% in real terms in 2013, rising to 3.8% in 2014. Although we expect growth in the UAE to slow in H213, as net exports fall on the back of lower oil prices over the rest of the year. However, there are bright spots for the economy as property prices in Dubai appear to have bottomed, and fixed investment continues apace Encouragingly for auto sector demand, both consumer and business sentiment towards the UAE have improved significantly since the start of 2013, with real estate and equity markets showing the most notable signs of improvement. Dubai's DFMGI and Abu Dhabi's ADX are the two best performing equity markets in the Middle East since the start of the year, having posted gains of 33.1% and 32.5% respectively and boding well for a positive wealth effect. While there has been a pullback of late, as part of a wider move away from equities globally, we remain bullish towards both indices, given positive underlying fundamentals.

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One slight downside risk to our forecasts is posed by rising inflation, which BMI forecasts to reach 2.3% by end-2013. We expect this trend to continue over the coming months, as a solid macroeconomic backdrop and an improving housing market in Dubai take hold. According to latest data from the National Bureau of Statistics (NBS), CPI across the country came in at a 25-month high of 1.3% y-o-y in July, up from 1.2% and 1.0% in June and May respectively. This could potentially 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.

At the lower end of the market. Chinese manufacturers are looking to tap into the growing potential of the UAE market. In August 2013, local dealer Al Habtoor Motors announced that it is to launch Chinese automaker JAC Motors' passenger cars and trucks in the UAE. The move came after a dealership agreement was signed by Sultan Al Habtoor, the president of Al Habtoor Motors, and Carl She, the general manager of JAC Motors. As part of the deal, JAC will launch its passenger, light commercial and heavy commercial vehicles in the UAE market. Al Habtoor Motors is planning to open the first JAC Motors showroom in Dubai, followed by Abu Dhabi in H114.

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