Lexus is the go to choice for limousine fleets in the UAE wanting an alternative to the upper premium tier brands in the market. Featuring all the trappings you would expect for a blue ribbon brand, plus the Middle East conditions reliability you would expect from a marque associated with Toyota, Lexus’ exclusive UAE partner Al Futtaim Motors (AFM) holds an enviable position in the market, managing director Carlos Montenegro explains to T&FME.
“Obviously, the Al Futtaim family has almost forever been the sole distributor of Toyota!” He jokes. “30 years ago, they also agreed to take the Lexus brand and since then, there’s been a terrific job done in the market. Lexus is the number one premium brand in this market and in 2019 it was recognized as the second most recognized brand in the country.”
Montengro is sitting with T&FME minutes after chairing a meeting where the brands burgeoning 2021 line-up was presented to the AFM team. The end of 2020, saw a flurry of new car announcements, including refreshes for the LX luxury SUV and the all-important LS, its flagship sedan. After a challenging year for the automotive trade in the UAE, he says the company is excited about the opportunities that lie ahead for the brand. Its storied reliability will be a major strength in the post-COVID climate. He predicts the brand can continue to serve its trusting UAE national drivers which make up the majority of its customers while penetrating further into an expat market looking for premium models.
“Our customer portfolio is 80% Emirati-based. Lexus has built its whole reputation in this market thanks to the strong reliability of the cars, plus the features and performance – that’s also brought a tremendous residual value in the car especially in the aftermarket,” he remarks. “Overall, Lexus has managed to get a very strong brand with prestigious cars that are reliable.”
Beyond the cars themselves, he says the UAE remains a benchmark for the Lexus globally in terms of how to treat its customers: “We are known for our hospitality. The UAE is the model worldwide”.
The fleet market in the UAE is focused on leasing and rental options for customers as well as limousine services. Montenegro says that reliability is once again the brands strength in the sector, particularly with fleets operating in the latter segment.
“When Careem and Uber merged they decided the most reliable car for the limousine service was the Lexus ES (executive saloon),” he enthuses. “We actually have a 100% of that segment because of the reliability of the car – those cars easily make a million kilometres before they are renewed – and also the TCO (total cost of ownership). We are also adding to the fleet the hybrid version. These have been key factors for us to be leaders in the segment.”
Montenegro says that Lexus is consequently present in all the fleets of leading enterprises in the market and in many rental fleets in the market. As you would expect, many of those are in the hospitality and hotels sectors – many of whom are almost literally at the high end of the market.
“We are present in many high-end services like private jet firms where do you know those limo services up to the super high-end customers,” he adds.
Talking of customers at the high-end, Al-Futtaim Lexus launched a limited-edition gold version of its LX 570 2021 at the start of the year which will be available to an exclusive pool of UAE drivers to own. LX 570 is described as a powerful and aggressive model, “handling the most extreme driving conditions effortlessly taking customers from tackling off road trails during the day to become the showstopper when pulling up outside a red-carpet event at night”. It is the sort of vehicle people associate with desert glamour escapism of the UAE.
“The Lexus LX 570 is especially very much used also by the leaders of the government, such as Sheikh Mohammed’s office and all of the Sheikh offices in the rest of the Emirates. It’s a very prestigious car within the government sector.”
For fleet buyers in the UAE, Montenegro argues that the cost of fuel is an important consideration despite its still relatively cheap pricing to other markets. When your vehicle does a million kilometres the dirhams and fils count for Lexus customers.
“When you go in to people that make a lot of kilometres, they own sedans: the Lexus ES, EX and the hybrids,” he says. “For them TCO makes a difference. Even though the petrol here is not expensive compared to, say, Europe you do easily get a reduction in the cost of your fuel because of the high kilometres these people do.”
Stressing that this help creates a compelling case for fleets when considering Lexus, he says that the vehicles are holding onto competitive residual values helping boost the overall TCO for fleets which must factor in selling the vehicle down the line.
“Residual value makes a tremendous difference,” Montenegro adds. “After three or four years, the cars are valued higher than all of our competitors. Plus, as you may know, Dubai and UAE is a big hub to export to other markets: The Lexus brand is also very much appreciated in the Gulf market and Africa.”
The leasing market is becoming an increasingly influential part of the UAE market. For years, it represented 5% of the total sales in the vehicle but, Montenegro says this is changing and heading upwards; although currently well-short of the 40% you would expect in a European car market, for instance.
“It’s been under-utilised here but now it’s booming,” says Montenegro, adding that fleets are moving away from a simple strategy of purchasing before then dumping vehicles into the market when they need to de-fleet. New strategies are evolving to ensure that they are sold earlier, while still holding a high value and turn an ageing fleet into a useful source of income.
With leasing much more attractive to customers, a new market is emerging; some fleets are also tapping into demand for longer term arrangements that makes attaining premium vehicles much easier for drivers without having to be committed to purchasing them out-right.
“There are several big operators now. AFM handles Hertz and they have the rental arm but they now also have a leasing arm. It is almost becoming the same to what you might find in Europe: where the cars are held for two or three years then defleeted and resold either locally or through traders. I think many of them go into private ownership with many of them going into auctions.”
While he sees change in the fleet leasing and rental market, he argues that beyond the UAE it remains underdeveloped. This can open up re-sale opportunities for AFM and Lexus, he argues.
“When you have a car, or a brand, which has strong residual values, you have the best strategy you can have, right?”
Find out why AFM Lexus feels the upcoming Expo 2020 Dubai is critical for the automotive market in the UAE in the February issue of Truck and Fleet Middle East.