Drivingfwd aug2015

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bq | RETAIL+LEISURE | CAR DEALERSHIPS

FABRICS ARE IMPORTED INTO THE GCC FROM Spain

France

Germany

Italy

Austria

Switzerland

India

Pakistan

Mongolia

Taiwan

Hong Kong

Tunisia

the GCC countries is working hard to diversify its economy, with the objective of reducing the oil sector’s contribution to GDP to 9 percent by 2020. Oman wants to produce cotton which is known for good returns, revive the country’s textile industry, and preserve the almost extinct domestic variety.

The formation of Dubai Textile City in 2000 was part of a mission to improve services to members in the trade and enhance the image of Dubai as the largest and most convenient textile-trading hub in the region Opportunities are huge: organic cotton is in demand all around the world – global production was up 10 percent in the last three years, and international non-profit organisation Textile Exchange predicts the growth of organic cotton market at 15 to 20 percent in the next year. Last year, organic cotton grew by 67 percent in market value to USD 15.7 billion and the number of facilities certified to produce organic cotton grew by 22 percent. The market is driven by Dutch C&A and Swedish H&M, but the number of high-end brands, like Stella McCartney, that are using organic cotton, is growing as well. www.bqmagazine.com

QATAR

DRIVING FORWARD With the recent crackdowns on car dealerships, are nonagents a better choice for vehicle purchases?- A Report

By Rajeev Acharya and Shereen D’Souza, Doha

A tug of war going on between the government and automobile agents over the pricing of cars for almost a decade took a new turn late last May when the Ministry of Economy and Commerce, in a press statement, reminded the dealers and the public in general of an anti-trade monopolies law that was put into force some 13 years ago, in 2002, to end monopolistic business practices in line with Qatar’s free market policies. The ministry maintains that car agents sell automobiles at higher prices than in neighbouring countries, while the agents claim the Qatari government prescribes strict standards and specifications for vehicles, and also because Qatar is a small market, so costs are higher.

The tussle between the two sides car agents and the government - is an old one, as is public knowledge, but some questioned the relevance of a sudden reminder by the ministry of a 2002 law, while some others felt there was much more behind the ministry’s move. However, the fact was that while many had heard about the law, few were familiar with its clauses. The ministry said the reminder was aimed at ending the confusion about the implications of the law (Law Number 8 of 2002) since it was all about car import rules and the import right of exclusive automobile agents as also of nonagents, Qatar News Agency reported late in May.

Agent and non-agent imports Any non-agent car dealer who had an import license, or in other words, his name figured in the country’s import register, could import vehicles of any brand for sale in Qatar on two conditions. First, he would have to bring the cars from sources other than the manufacturer, as the right to import vehicles for sale in the Qatari market will continue to be enjoyed by the exclusive agent. Secondly, a non-agent dealer (a dealer who doesn’t have the exclusive right to import a vehicle brand directly from its manufacturer) will have to provide warranty to buyers, as also the required after-sales service and original spare parts within the warranty period, as required by the law in question (Number 8 of 2002).

The ministry hinted that although the law was old, it was largely misunderstood and that extensive rules were yet to be put in place regarding the conditions for the import of cars by non-agents. The ministry said in its May press statement that it would soon lay down those conditions. “Nonagents have the right to import the same brands from overseas, whether from dealers in other countries or some other sources, for sale, except directly from the manufacturer,” said the ministry. It added that it was all set to enforce the law effectively and rid Qatar’s “free market” of monopolistic trade practices to benefit consumers at large. Some

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businessmen were quick to remind, in remarks to local newspapers, that new cars would be at least 25 to 30 percent cheaper if this law was implemented with all sincerity.

A former board member of Qatar Chamber, representative body of the private sector, Mohamed Kazim Al Ansari, told a local Arabic daily allowing non-agents to import new cars for sale would give a wider choice to buyers and help push car prices down by 25 to 30 percent. Former vicechairman of the Chamber, Abdulaziz Al Emadi, went a step further and asked why the anti-trade monopolies law was being applied only to the automobile sector and why not to medicines and pharmaceuticals. “The import monopoly of medicine dealers should also be broken to make medicines cheaper,” he said adding medicines are highly expensive in Qatar.

It is public knowledge that nonagents can also import cars for sale, said some dealers in comments that appeared in a local Arabic daily. “Why talk about the law now? It is too old,” commented one dealer wondering about the relevance of the ministry’s reminder now.

The better choice The exclusive agents said very few nonagents imported cars for sale in the local market as compared to agents.

Agents can sell cars cheaper because

they import in bulk and directly from the manufacturers. This also helps the agents to offer discounts and promotions like free insurance and extended warranty while non-agents cannot afford such things. On the other hand, cars imported by non-agents can be expensive as their original price would be higher compared to the price paid by an exclusive agent, said the agents.

Secondly, since non-agents order smaller consignments, the cost of shipping would be much more as compared to agents who get cars shipped in bulk thus cutting on transportation costs.

“This simply means that non-agents cannot compete with us,” said another exclusive dealer in comments to a local daily. Moreover, it is difficult for nonagents to comply with the conditions of warranty and servicing while agents can and do easily abide by such conditions, which are legally mandatory.

“Purchasing from a non-agent would also mean we probably won’t service those vehicles.

There’s no saying if the parts in the car are genuine, and we won’t take such risks” A dealer spoke to BQ magazine anonymously and mentioned that despite their knowledge of the existence of agents, there was nothing they could do. However, it clearly made better sense for any customer to purchase the vehicle from the dealers itself. “Purchasing from a non-agent would also mean we probably won’t service those vehicles. There’s no saying if the parts in the car are genuine, and we won’t take such risks,” said the dealer.

The deal with dealerships The ministry, earlier this year, temporarily shut down in punishment three showrooms of a well-known car agency accusing it of selling to people damaged cars after repairs, passing them off as new. The main showroom of the dealer on Airport Road and two side showrooms on Salwa Road were shut down temporarily. The ministry, as we know, made first such move against a car dealer in December 2014 taking

everyone by surprise. After that several other car dealers were punished in a similar way allegedly for selling damaged cars to buyers after repairing and painting them and passing them off as new.

Strangely, the dealers have not reacted so far to give their version of the story. They have been maintaining a stoic silence. What is more inexplicable is that they haven’t spoken to the local media even clarifying their position.

BQ magazine managed to speak to a dealer off the record: “A representative of the CPD (Consumer Protection Department) looked through some reports where customers had said they weren’t informed of the scratches on cars. This led to closing down the dealership after that.”

Although, according to them, the customers were not dissatisfied with the product and also had no objection to the scratches, the CPD took action anyway. The dealer briefly clarified that the sub-dealers had not informed the dealership of such scratches and the sub-dealers are the ones selling the vehicle while only the invoice comes from the dealership’s head office. “The sub-dealers were shut down too for seven days,” he added.

The ministry’s action has been lauded by people in general but, as expected, it has been criticized by some businessmen and at least one newspaper columnist. Mohamed Al Kubaisi said in a write-up earlier this year, that appeared in a local English daily, the ministry can call a product fake or corrupt only if it does not meet local standards and specifications. The cars in question were not fraudulent because they were usable and complied with GCC standards and specifications, he said. He hinted there were “other reasons” due to which the government was hounding car agents. He didn’t elaborate, though.

According to a recent statement published on QNA (Qatar News Agency), the Ministry of Economy and Commerce recently issued a memo obligating car agents and showrooms to obtain a “written endorsement” from customers that proves they are aware of all repairs performed on a vehicle prior to its purchase, as a supporting move. * With inputs from Ferras Mohssen and Rashid Rahman

August 2015