Key Insights on Maintenance Services Market in Abu Dhabi City

Automotive Practice Frost & Sullivan, UAE February 2016

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Table of Contents

ABU DHABI PROFILE & FACTORS DRIVING GROWTH 3 1

UNDERSTANDING UNITS IN OPERATIONS (UIO) AND

MAINTENANCE MARKET SIZE 6 2

AREAS OF OPPORTUNITIES 14 3

ABOUT FROST & SULLIVAN 18 4

Abu Dhabi Profile & Factors Driving Growth

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Abu Dhabi Profile Abu Dhabi the capital city Contributes 67% of GDP, 93% of Oil Production and 69% of total industrial output of UAE

Source: SCAD

* At Current Prices

Population Abu Dhabi Emirates = 2.66 million (2014) Average Annual Population Growth Rate (2005- 2014) = 7.6% Non Citizen: 80.9%

GDP* AED 953 Billion (2014) Growth: 2.2%

Oil Share in GDP 51%

Industries Petroleum and petrochemicals, aluminum, cement, fertilizers, commercial ship repair, construction materials

Level of Industrialization

Medium

Major Companies ADNOC, GASCO, Etisalat, ADPC, Etihad Airways, Aldar Properties

GDP Per Capita AED 358,600 (at current price)

Inflation 3.2% (2014)

Education Level 92.5% of literacy level

Exchange Rate 1 USD = 3.67 Emirati dirhams (AED)

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GDP & Automotive Industry—Factors Driving Growth Focus on Tourism and spill over effect of key events like Expo 2020 will drive growth of Vehicle industry. Total registered Cars are expected to reach 782,500 which will offer huge potential for maintenance & service market

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2010 2011 2012 2013 2015F 2020F

Pe

rce

nta

ge G

row

th

GDP Growth Per Capita Income Growth Total Vehicle Growth Car Buses Trucks

GDP Growth and Increasing Per Capita Income is driving the growth for Abu Dhabi Automotive Industry.

• GDP is expected to grow at a CAGR 5.0% (Optimistic estimate)

• Car Industry is expected to grow at CARG 6.0% driven by Taxi and Rental fleet business

• Government focus on Tourism will drive growth of Taxi and Rental fleet which are expected to grow at 8-10% in the next five years

• Key events like Expo 2020 will further drive growth of Taxi and Rental fleet operations

Source: Frost & Sullivan

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Market Drivers and Restraints These factors will drive the growth for vehicle sales in future

Vehicles Market: Key Market Drivers and Restraints, 2015-2020

Denotes long-term impact

Denotes current impact

Driv

ers

Restr

ain

ts

Driv

ers

Restr

ain

ts

Increasing tourism

will further create the

demand for Light

duty trucks and

buses

Spill over effect of Expo

2020 and developing Abu

Dhabi as global mega city

Increasing

Industrialization

and growth

manufacturing

hubs

Source: Frost & Sullivan Analysis

Investments by Abu

Dhabi Emirates for

infrastructure

development

Rapid urbanization with

numerous infrastructure

projects undertaken by

government

Overloading practices in

Heavy commercial vehicles is

reducing the actual demand

for Trucks Crude Oil Prices and Global

economic slow down has a

direct impact on Abu Dhabi

economy

Establishment of Etihad rail

will decrease the demand for

long haulage vehicles in a

long run

Understanding UIO and Maintenance Market

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What is the total market size? …Units in Operations (UIO) and Maintenance Service Market

Segment Units in

Operations (2014)

% Share in UIO by

segment

Total maintenance

market (Million AED)

% Share of maintenance

market by segment

Average Cost of

Maintenance (AED)

Cars & Pickups 546,250 91.4% 1,907 66.0% 3,491

Buses (Light & Heavy)

17,600 2.9% 242 8.4% 13,773

Trucks (Light & Heavy)

33,550 5.6% 740 25.6% 22,063

Total 597,400 2,890 4,837

Which Segment includes what

• Cars & Pickups: Taxi, Rental Car, Leasing and Private Cars

• Buses: School Bus and Private Bus

• Trucks: Light Trucks and Heavy Trucks

Source: Frost & Sullivan

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How Attractive is Cars & Pickups Segment? …Units in Operations (UIO) and Maintenance Service Market

Cars & Pickups Segment

Units in Operations

(2014)

% Share in UIO by

segment

Total maintenance

market (Million AED)

% Share of maintenance

market by segment

Average Cost of

Maintenance (AED)

Taxi 8,250 1.5% 28.9 1.5% 3,500

Rental Cars 9,500 1.7% 28.5 1.5% 3,000

Leasing 23,000 4.2% 80.5 4.2% 3,500

Private Cars 505,500 92.5% 1,769.3 92.8% 3,500

Total 546,250 1,907.1 3,491

• Taxi vehicles only include the licensed taxi, whereas the personal cars segment includes cars, SUVs & Private Pickups owned by individual customers.

• The yearly maintenance cost include 3 to 4 minor service and 1 Major service

• Average maintenance cost in Taxi & Leasing segment = Minor Maintenance = AED 320-350; major Maintenance = AED 2,000-2,500

• Rental Car = Minor Maintenance = AED 300-330; Major Maintenance = AED 2,000-2,500

• Private Segment = Minor Maintenance = AED 400-450; Major Maintenance = AED 2,000-3,000

Source: Frost & Sullivan

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Preferences from service standpoint: • One stop service preferred • Fast turnaround time as vehicle downtime means losses • Cost is a constrain for fleet operators, hence used & remanufactured parts are also acceptable • Fleet owners and private customers owning luxury vehicles prefer quality over cost of servicing

Cars & Pickups Continued… Fleet Business

Customer Name Fleet Size (Volume) Maintenance Expenses P.A. (Mn AED)

Europcar 2,500 8.8 National Taxi 1,595 5.6 Thrifty Rent a Car 600 1.8

Tawasul Taxi 1,000 3.5

Emirates Taxi 1,245 4.4

National Rent a Car 200 0.6

Cars Taxi 1,021 3.6

Al Arabia Taxi 1,021 3.6

Al Gazal, Al Wathba, Avis, Eurocar, National Taxi, Thrifty Rent a Car, Tawasul Taxi, Emirates Taxi, National Rent a Car, Cars Taxi, Al Arabia Taxi are the key rental and fleet service provides in the selected market, In below table we have tried to cover the fleet size and maintenance expenses details for the year 2013/14.

Information on Al Gazal and Al Wathba are not known Source: Frost & Sullivan

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How Attractive is Bus Segment? …Units in Operations (UIO) and Maintenance Service Market

Bus Segment Units in

Operations (2014)

% Share in UIO by

segment

Total maintenance

market (Million AED)

% Share of maintenance

market by segment

Average Cost of

Maintenance (AED)

School Bus (Large) 2,300 13.1% 41.4 17.0% 18,000

School Bus (Medium)

2,900 16.5% 29.0 12.0% 10,000

Private Bus (Large) 6,000 34.1% 108.0 44.6% 18,000

Private Bus (Medium)

6,400 36.4% 64.0 26.4% 10,000

Total 17,600 242.4

• Private Bus includes City Bus, Staff Bus, Tourist Buses and Labor transport Buses

• School buses include all government and private run buses

• Medium Buses include Toyota Coaster and other such vehicles which have a capacity of 15-30 passengers; where as large buses has capacity of more than 50

• The yearly maintenance cost include 3-4 minor service and 1 major service. The cost of these services are

− Medium Bus = AED 1,200 (minor service) and AED 5,000 – 6,000 (major service)

− Large Bus = AED 2,000-3,000 (minor service) and AED 12,000-14,000 (major service)

Source: Frost & Sullivan

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Bus Segment Continued…

Al Gazal and Avis Bus are the largest providers who operates their own workshops. Apart from these the key players includes Abu Dhabi City Bus, Euro Cars, Emirates Transport, School Transport Services LLC, Shanawaz Bus Rental, Abu Dhabi Bus Rental, Aliyas Group, Royal Bus Rental, Vista Bus, EuropCar, Al Mariah General Transport . We have tried to capture details on few large fleet operators in below table for 2013/14

Information on Al Gazal and Avis Bus are not known

Customer Name Fleet Size (Volume) Maintenance Expenses P.A. (Mn AED)

Abu Dhabi City Bus 650 6.5

EuropCar 1,000 14.8

School Transport Service LLC / Bright Bus 140 2.2

Preferences from service standpoint: • Most Bus operators own their workshop • Many private school give contract to third parties for transportation • School buses must be maintained for high reliability • School, staff & Labor Bus operators prefer servicing on weekends while tour operators prefer on weekdays

Source: Frost & Sullivan

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How Attractive is Trucks Segment? …Units in Operations (UIO) and Maintenance Service Market

Bus Segment Units in

Operations (2014)

% Share in UIO by

segment

Total maintenance

market (Million AED)

% Share of maintenance

market by segment

Average Cost of

Maintenance (AED)

Light Trucks 6,500 19.4% 91.0 12.3% 14,000

Heavy Trucks 27,050 80.6% 649.2 87.7% 24,000

Total 33,550 740.2

• Truck demand is mostly driven by Heavy Trucks used for various activities in the oil Fields – ADNOC and GASCO are the biggest end users of Heavy Trucks

• Trade logistics and Real Estate (infrastructure development) is another big end user of Heavy trucks

• Most Heavy truck owners are in the business of Heavy Machinery leasing

• Light trucks are mostly used for distribution, in retail industry and as Recovery Vehicles for Car servicing

• Trucks are generally used for a long duration, a minimum of 10 years

Source: Frost & Sullivan

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Truck Segment Continued…

We have tried to capture details on few large fleet operators in below table for 2013/14

Preferences from service standpoint: • Maintenance is a recurring and big cost for Truck owners hence they prefer own workshops to control the

expenses • Low downtime is important to avoid losses • On the service side Truck Zone Maintenance part of Al Kamal Group takes care for maintenance of Renault,

Scania and Volvo Trucks • Al Jaber Group: provides Maintenance, repair and Refurbishment of Equipment, Machinery and Vehicles in

their workshops.

Customer Name Fleet Size (Volume) Maintenance Expenses P.A. (Mn AED)

Al Sahraa 500 11.2

AL Jaber 500 11.7

Western Bainoona Group

300 6.9

Al Rashid Transport 800 18.4 Dana General Transport

50 1.2

Al Kamal General Transport

230 5.4

Micco Logistics 230 5.3 Agility 400 9.4

Source: Frost & Sullivan

Areas of Opportunities

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Areas of Opportunities

Taxi companies who are looking forward to outsource their maintenance activity, hence they can focus on their core competence.

– Design and offer a comprehensive Service Package to existing Taxi Companies

As Rental and leasing fleet operators grow, they would need better services for their maintenance activities. This segment likely to witness more than 10-12% growth over next 6-7 years (supported by key events like Expo 2020).

Private owners will remain segregated but offers good potential as target market, need to have innovative offers to attract these customers.

Emphasis on tourism industry by Abu Dhabi Government will drive growth of Private Transport Buses

Industrial activities will continue to drive demand for labor transport buses

Demand for School buses will mainly be driven by Private Schools in the coming years

Car

Segm

ent

Bus S

egm

ent

Source: Frost & Sullivan

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Areas of Opportunities (Continued)

Most Heavy Truck owners have their own workshop to have control over the maintenance cost of the fleet. Servicing cost at the dealership is too expensive for the big fleet owners, hence they prefer own service shops. Favorable Maintenance service contracts can attract these big fleet owners to outsource their maintenance activity.

Provide Mobile Service Vans for onsite servicing especially for vehicles used in Construction sites

Offer value added services like Lubricant Analysis for preventive and predictive maintenance for Key Accounts

Offer limited warranty on parts after servicing to key customers to increase retention

Offer attractive and comprehensive AMC package to large fleet owners to tap their business

Tru

ck S

egm

ent

Source: Frost & Sullivan

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