Industry executives have advised UAE residents planning to purchase pre-owned vehicles in the next six to 12 months to be mindful. They recommend buying from approved pre-owned vehicle companies or thoroughly inspecting vehicles before purchasing.
The storms in the region last week brought the heaviest rainfall since records began 75 years ago, causing severe road flooding and leading to thousands of cars damaged. These cars are likely to be put up for sale in the local market.
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Abhinav Gupta, CEO of the Gulf region at Cars24, estimated that thousands of cars have been affected, though the degree of impact will be different.
“Sharjah and Ajman are more affected than some parts of Dubai. Lately, a lot of our buyers have come back, either wanting their cars serviced or looking for new cars. We spoke to many partners also who indicate the same figures,” said Abhinav Gupta, CEO for the Gulf region at Cars24.
Gupta estimated that 20-25 per cent of submerged cars would likely have serious problems or damages (depending on the scenario).
“Owners will retain those cars that are repairable. They will come later. Most of these cars should return to the market in the next six to 12 months.”
Based on the estimates of e-commerce platforms for pre-owned vehicles, around 0.5 million pre-owned cars were sold last year, growing at 7 to 10 per cent year-on-year.
Where will submerged vehicles go
According to Gupta, there are three categories of damaged vehicles – first, that are completely submerged and beyond repair because damage cost exceeds the value; second, cars that are repairable but costly; and third, vehicles that have minor damages.
“The first two categories will be tricky because either insurance companies will write them off or end-users will not get insurance, so they may get them repaired or sell them off. Eventually, all these cars will end up either at auctions, classifieds websites, or local dealers in industrial areas who will take them to cheap workshops to do basic repairs and cosmetic fixes,” Gupta told Khaleej Times in an interview.
He cautioned that these cars would be a risk to those who plan to buy pre-owned vehicles in the open market because these vehicles will most likely remain up for sale over the next 6-12 months.
“The reliability of these cars will be questionable because if these cars are repairable, insurance firms will not write them off. Water has seeped into engines, transmission and electrical are affected, and airbags may not function later; the reliability of these cars is definitely questionable. The garages these cars are taken to for repair are also not trustworthy. Therefore, it doesn’t make sense to buy these cars for personal use,” he said.
In this scenario, he suggested that buying from unorganised open markets, classifieds websites or small dealers is a very risky bet.
The Cars24 CEO added that a certain portion of these vehicles damaged in floods will be exported to African and Middle Eastern countries as well. “The majority will end up in the open market and some of them will also be sold out of the country,” Gupta said, adding that organised pre-owned car players in the market will benefit.
Will car prices go up or down?
Gupta forecast that trusted and organised players would be able to command a premium because there could be a supply-demand gap.
“Definitely, good-quality used cars should see some increase in prices. There is some artificially built-up demand because of the floods, and some used car prices should spike in the next 6-12 months,” he said.
He added that UAE motorists who have lost their vehicles will look for a new one, driving additional demand for cars. And cars which were not damaged in the floods will be fewer than before the Eid Al Fitr period, so there will be lesser supply, resulting in a gap between supply and demand,” he concluded.