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Guide to set up an auto spare parts business in Dubai, UAE

December 16, 2021

“How to set up auto spare parts business in Dubai” is one of the most searched topics on the internet when it comes to setting up a company in Dubai. But, before we move to the incorporation steps or procedure, here’s a detailed view of the current auto spare parts industry in UAE and why you should invest in it.

 

Overview of the UAE auto spare parts industry:

According to a report by TechSci Research, the automotive aftermarket of the Middle East and Africa (MEA) will see an annual growth of 7%, reaching a value of $31 billion by 2022. The report also projects revenues rising to almost $40 billion for the auto spare parts sector by 2024. This rise will be driven by the large vehicle population of the Middle East which is expected to increase to 27m units by 2023 (a report by research firm Aranca), many of which will require replacement parts.

The TechSci report further states that electric components, radiators, and exhausts are the most sought-after parts in the Middle East. These are followed by other components like tires, lubricants, axles, transmission components, air and oil filters, suspension systems, batteries, brake pads and brake shoes, bumpers, doors, and windshields.

According to the report by research firm Aranca, the value of the Middle East automotive market will reach $18.5m by 2023, and UAE, in particular, will contribute heavily to this growth as it currently stands as the second-largest automotive market in the GCC region.

The demand for the automotive service industry and auto spare parts in UAE will remain robust, taking into consideration factors such as population growth, increased competition, and expected improvement in car sales going forward.

Key growth drivers for UAE auto spare parts industry:

  • The UAE is a leading supplier of automotive spare parts for Iran, the Indian subcontinent, Africa, and the Commonwealth of independent states.
  • UAE offers zero surcharges on the trade of auto-accessories.
  • There are specialized commercial zones in Dubai that are hugely invested in the trade of auto parts. The infrastructure, tax systems, favorable environment, labor force, and affluent consumers make it one of the best places to invest.
  • Dubai traded about 2.1m tonnes of auto spare parts and accessories worth $10.3 billion in 2018, up 32% on its value a decade ago. Growth in this sector is also supported by new infrastructure developments where a large number of trucks are required and the truck fleet owners purchase OEM brands from the aftermarket to get the same quality at much cheaper prices.
  • Jebel Ali Free Zone has emerged as the UAEs principal entry point for the used car sector and handles 78% of the used car imports and 31.8 billion dirhams of the auto spare parts industry year-wise.
  • The UAE government is also promoting localized production of spare parts by OEMs. This will further curb the prices and boost the sales of auto spare parts in the country.
  • Another boost to the auto spare parts market comes in the form of vehicle modification. Demand for this has risen in UAE where the youth population seeks to make their vehicles look more distinctive and perform better.
  • Dubai stands out among any other geography for auto spare parts trading company set up with its vision for the automobile industry in the next 10 years. Dubai already has a driverless, smart metro and aims to build a transport system for the future that works on these lines. For this, it ensures and encourages a commercial environment that would be suitable and lucrative for businesses to invest in the auto spare parts or components industry.

Key business jurisdictions to start auto spare parts business in Dubai, UAE:

  • Mainland Business Setup: Setting up a business in Mainland Dubai allows you to open a business in any neighborhood of Dubai, or do business locally.
  • Free Zone Business Setup: This type of business setup allows you to have 100% ownership of your business in the respective Free Zone.

How to set up auto spare parts trading company in Dubai, UAE

Below are the steps that one needs to follow while starting an auto spare parts business in Dubai, UAE

  • Decide the business activity: The business activity needs to be articulated and listed in detail to be clear. The entrepreneur needs to decide if they are only going to work on the trade of auto parts physically or provide an online retail shop, with 24*7 customer services, and others. A list of business activities needs to be prepared before approaching DED or any other legal body.
  • Register a trading name: There are certain rules regarding a company name in Dubai, such as it should be unique and catchy, and not blasphemous or offensive, and should not be related to any religion. You need to keep these aspects in mind before deciding on a name for your company.
  • Ideal business location: Business location is critical depending upon the business requirements. These requirements could be transportation access, customer demography, team size, business requirement, and accessibility, and so on. Depending upon your location, it matters whether an Emirati would have 51% of your shares, or you would have 100% ownership.
  • Obtain a pre-approval certificate: You can secure a pre-approval certificate by submitting the required documents. This certificate is required for approval from other governing bodies too.
  • Acquire a legal trade license: A trade license is either professional or commercial. Therefore, your business activities and special approvals decide which license you’ll need to secure to legalize your company in Dubai.
  • Manage visas: Managing visas is important, whether it is for you, your business partners, your employees, or your family. Having this sorted can make your business setup/legal requirements covered to a great extent.

    Process for applying for a visa:

    • Applying for an entry permit
    • Status adjustment
    • The medical test needs to be cleared
    • Emirates ID registration
    • Visa stamping

Documents required to start auto spare parts business in Dubai, UAE:

  • Passport copies of all business partners and owners of the company
  • Registration application form
  • Fee receipt of the initial approval certificate
  • NOC in cases of being a resident of Dubai, provided by the employer
  • Office lease agreements
  • MOA & partnership agreement

How MBG can help

MBG is one of the leading consultancies that can help entrepreneurs and businesses to start auto spare parts business in Dubai, UAE.

Our seasoned professionals, customized services, and proactive approach ensure that all your business setup needs in Dubai are met. We have an impressive base of successful and satisfied clients to vouch for.

Source:- Automotive Logistics

For more info, reach us at: Business Setup in UAE


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