Following two years of strong headwinds, there is now rising optimism for the UAE’s automotive sector. According to Fitch Group company BMI Research, 2018 will see a 4% growth in new vehicle sales in the UAE. Its forecast for the MENA (Middle East and North Africa) region is for a 7.3% increase this year, led by commercial vehicle sales, while the Gulf Co-operation Council (GCC) markets will return to growth of 2.9%.
The region’s two premier ports, Khalifa Port in Abu Dhabi and Jebel Ali Port in Dubai, are vying for control of this lucrative market.
Ross Thompson, chief commercial and strategy officer at Abu Dhabi Ports, emphasises that vehicle logistics is very important to most ports.
“We are putting a lot of effort into this area on many fronts,” he says. “The joint-venture company we have recently created will establish a regional hub for deep-sea imports of vehicles on a hub-and-spoke system. We very much see vehicle logistics following the container market, where deep-sea vessels will come into hubs and you will have networks of smaller feeders that will serve other countries. We are positioning Khalifa Port to do that.”
However, the belief is that the UAE, and particularly the two main ports and trade zones, can offer the automotive sector more than just access to the market for imported vehicles.
“We think there should be more automotive assembly in the UAE – particularly Abu Dhabi – not just importing of finished cars,” Thompson says. “The value of our trade zone is that you can have the finishing of the product very close to the port in a cost-effective way with distribution; you can have your spare parts stored in the same vicinity in a cost-effective manner and you can distribute not just in the UAE but other GCC countries.
“Automotive will change and automotive manufacturers should look at the GCC, whether that be assembling in its entirety from scratch or finishing. I think we will see that in the very near future and we are positioning ourselves for that.”
Partnering for success
In Abu Dhabi they are opting for a partnership model to fast-track their automotive ambitions. Autoterminal Khalifa Port, a joint venture between Autoterminal and Abu Dhabi Ports, will manage the ro-ro and car terminal in Khalifa Port under a 15-year concession, providing a strategic location for import traffic into the 100 sq.km Khalifa Port Free Trade Zone. The aim of the venture is to position Khalifa Port as the regional hub for all commercial trade routes in the Gulf, East Africa and the Red Sea.
The strategic alliance to create Autoterminal Khalifa was finalised earlier this year. Autoterminal Khalifa Port was established in April 2018 with Pierre Algeo as CEO.
“Rail transport is becoming more important by the day within the vehicle supply chain and should definitely be considered in the future. The port infrastructure has been developed taking this option into consideration.” – Pierre Algeo, Autoterminal Khalifa Port
“Since then, we have been working to define the strategy of the new joint venture; plan the adaptations to be carried out in the current facility to meet Autoterminal Barcelona’s requirements; start the implementation of Carsys, the in-house operating solution used in Autoterminal Barcelona and the other six car terminals owned by Noatum Maritime Automotive [see box, below]; and get the teams ready for the scale-up of the ro-ro operations at Khalifa Port,” Algeo says.
The port of Khalifa already benefits from modern installations that Algeo believes will require only minor changes in terms of infrastructure. The pavements, lighting and berthing are already in perfect condition.
“Any funds or expertise that may be required to establish the car terminal and ensure that it operates with the best equipment, in line with the highest standards of quality, will come from Autoterminal Barcelona. The next step will be future investments to meet customers’ requirements in terms of added-value services with the construction of a technical centre,” he says.
“Our main goal, being the best ro-ro terminal in the Middle East, is to turn the port of Khalifa into the hub for the lower and upper Gulf, western India and east Africa, meaning that all ro-ro operators are welcome. In addition, as per the strategy developed in the Mediterranean, Autoterminal Khalifa Port guarantees complete neutrality for all shipowners and ensures the same high level of productivity and quality in all their operations,” he continues.
“Autoterminal Barcelona is the leading multimodal car terminal in the Mediterranean, with more than 25 years’ experience in the automotive sector. Autoterminal Khalifa Port will not only replicate the model developed by Autoterminal Barcelona, but will also benefit from its constant support in terms of quality, productivity and communication.”
That influence from Barcelona will be especially relevant when it comes to implementing a safety and quality strategy. As with the main Khalifa Port, Autoterminal has ambitious objectives when it comes to quality and safety, and will take advantage of the constant support from its Spanish shareholder.
“The same quality, health and safety, and environment procedures which made Autoterminal Barcelona’s reputation as one of the best, or the best, car terminal in Europe will be replicated in Autoterminal Khalifa Port,” Algeo confirms. “Also, the quality team in Barcelona will perform, on a regular basis, quality audits in Khalifa and will be directly involved in the monitoring of the quality management system of Autoterminal Khalifa Port.
“Health and safety is a priority for both shareholders and Autoterminal Khalifa Port will adopt the same policy, working on the elimination of the risk factor,” Algeo explains.
A multi-faceted offering
Autoterminal Barcelona will provide the necessary technology and software, procedures for quality, environmental protection and safety in the workplace, and also its international commercial network.
The current car terminal will progressively expand to 300,000 sq.m and already has the capacity for two deep-sea vessels at a time, with more than 550 metres of dedicated quay.
Algeo believes the fact that it is in Khalifa Port, one of the fastest-growing ports in the world, will make it a strategic location for import traffic, as well as provide excellent communications with other cities in the UAE and Gulf region.
“The new terminal will offer added-value services to all its car terminal users, such as pre-delivery inspections, vehicle customisation and other technical services,” he adds. “In terms of facilities, Autoterminal Khalifa Port wishes to start offering auxiliary services and added-value services as soon as possible.”
The port will be able to store approximatively 17,000 vehicles with full traceability inside the car terminal. Algeo declines to name specific companies using the port facilities, but says all kinds of vehicles will be handled in the port, both new and used, and both imports and transhipments.
“The team at Autoterminal Khalifa Port will be trained by the mechanic teams of Autoterminal Barcelona for the handling of the used vehicles, which require special mechanics’ skills and experience,” he adds.
High-and-heavy cargo also represents an important market for the port of Khalifa, and Algeo says Autoterminal Khalifa Port will again build upon Autoterminal Barcelona’s experience to develop this activity. “Special and mechanical skills are required for handling the high-and-heavy cargo, and the training programme in Barcelona will provide them to the Autoterminal Khalifa Port team, always in line with the highest quality standards,” he says. “When it comes to equipment, these are already in place; the Port of Khalifa already provides a large range of forklifts and tug masters for high-and-heavy cargo operations.”
Khalifa Port is directly connected to the main highways in Abu Dhabi, providing good connections throughout the Emirates, so, for now, that is the planned route for vehicles. However, the Emirates has an extensive programme to develop better rail infrastructure, too. “Rail transport is becoming more important by the day within the vehicle supply chain and should definitely be considered in the future,” Algeo says. “The port infrastructure has been developed taking this option into consideration.”
Algeo says all the services of Autoterminal Khalifa Port will be provided at a competitive rate, whatever the traffic. “Apart from the charges, it’s also important to take into consideration the development of quality and improvement of productivity which represent a direct saving in cost and lead time for the customers,” he adds.
An established player
Just 60km north-east of Khalifa Port sits the more established Jebel Ali Port, along with the Jebel Ali Free Zone (Jafza). The port benefits from over 25km of quay length and multi-functional capabilities. The ro-ro facility there can store some 27,000 car equivalent units (CEUs) and handle over 1m a year. As with Khalifa, it is near some of the world’s largest emerging markets.
The import of cars is primarily from the US and Japan, with 78% of the UAE’s used car imports arriving through the port. The UAE and the GCC form one of the world’s largest and most dynamic markets for automobiles, with Dubai traditionally a centre for used vehicles and providing a range of integrated support services for businesses operating in multiple locations.
The automotive and spare parts operation in Jafza is well established and recorded business worth more than £8 billion ($10.6 billion) in 2017. “The encouraging performance of the sector underlines Dubai’s position as the preferred logistics and distribution centre for the automotive industry in the region, which has been with us since the beginning,” says Sultan Ahmed Bin Sulayem, group chairman and chief executive officer of DP World. “We recognise how the industry has been an integral part of our success story.”
He says the vehicle and transport sector accounted for 11% of Jafza’s customer base and that there are currently 546 automotive companies from 62 countries, employing around 8,200 people. He adds that Jebel Ali Port and Free Zone form an ideal ro-ro hub close to some of the world’s largest emerging markets. Almost 1.1m vehicles moved through the port in ro-ro carriers and containers in 2017.
“Our integrated model of world-class port and free zone at Jebel Ali is the most efficient in the region, supported by multimodal connectivity,” he adds. “Our flagship Jebel Ali Port is served by more than 180 shipping lines that offer over 80 services a week, making it the gateway to the UAE and wider GCC and connecting to a global network in 40 countries.”
Handling used vehicles
The Dubai Auto Zone (DAZ) was created 18 years ago by DP World, operators of the port and the trade zone at Jebel Ali, and over that period it has grown to become a trading hub for the pre-owned vehicle trade in the UAE. It provides a range of services for the industry in one place, meeting all the business requirements of buyers, sellers, service providers and government organisations such as Dubai Customs’ inspection operations and documentation and the Dubai Road Transport Authority (RTA).
The operation has been so successful that DP World has plans to create a similar facility in the National Industries Park (NIP) close to Jebel Ali Port, with plans for multi-level car storage.
The DAZ targets many of the emerging markets across the region with their high demand for pre-owned vehicles, and has grown to partner 35 countries from Afghanistan to Austria, Pakistan and the Pacific islands, as well as exporting used cars to other Asian and African markets.
It now has high occupation with an active customer base of over 440 companies operating there and 2,600 employees.
Sultan Ahmed Bin Sulayem says the expansion of the infrastructure for the used vehicles industry has been driven by demand from customers.
“The investment in the multi-level storage facility at the NIP will complement the DAZ, optimising the use of land to cope with high occupancy rates,” he says. “It will also strengthen Dubai’s position as a commercial centre with global reach and support DP World’s role as a global trade enabler.”
When it is completed, the five-storey storage facility will cover 82,000 sq.m with space for more than 12,000 vehicles. It will be equipped with essential services required by the automotive industry, including 4,000 sq.m of office space for processing transactions and a 1,300 sq.m of workshop area for repairing, modifying and adapting vehicles to customer specifications.
“The additional capacity at the NIP complex, coupled with its proximity to Jebel Ali Port, will help to streamline the logistics of the used car market in Dubai,” Bin Sulayem suggests. “DAZ’s 18-year track record has made it a major marketplace for the region’s auto industry.”