In the UAE, the automotive sector has developed significantly over recent years to become one of the biggest drivers of growth in the country. Indeed, the UAE has the second biggest automotive sector in the Gulf Cooperation Council.
As the UAE economy looks forward in this post-pandemic era, the automotive industry is set to play a key role in its growth in the coming years.
This makes it the perfect time to start an automotive spare parts business in the UAE. This article will guide you through the process of how to do this, including:
- The spare parts business in the UAE – an overview
- Growth factors for the spare parts industry in the UAE
- Steps to start a spare parts trading business in the UAE
- Documents required to start a spare parts business in the UAE
- Cost of setting up a spare parts business
- How Worldwide Formations can help.
The spare parts business in the UAE – an overview
In the next five years, the automotive aftermarket in the UAE is expected to expand quickly, driven by the growth in the automotive industry and the number of people buying cars, as well as the number of drivers that seek to enhance the performance and appearance of their vehicles from the factory standard.
This trend is expected to fuel the growth in demand for components such as exhausts, radiators, air filters, suspension systems, brake pads and axles. Demand for other related products, such as tyres and lubricants, will also grow.
Demand for spare parts is expected to remain strong, given the continued growth of the population and resulting car sales. The growth in electric and alternatively fuelled vehicles in the coming years will also provide opportunities for entrepreneurs.
Growth factors for the spare parts industry in the UAE
As mentioned, the spare parts industry in the UAE is growing quickly, and there are numerous reasons for this.
For instance, the UAE does not just supply the Emirates, it also supplies parts to many other countries across the Middle East, Africa and the Indian subcontinent.
The UAE has also invested heavily to make it a favourable destination. For example, in Dubai, commercial zones focus on trading spare parts, and the infrastructure, tax regime and favourable business environment make it a desired destination for entrepreneurs. In addition, there are no surcharges on the trade of auto parts and accessories in the UAE.
The UAE government is also encouraging original equipment manufacturers (OEMs) to produce spare parts locally, which will help to reduce prices – by cutting transport needs – and boost sales.
There is also a burgeoning vehicle modification scene in the UAE. Many young people in the UAE are seeking aftermarket parts to accessorise their vehicles to make them look more distinctive or enhance their performance.
It isn’t just about cars – with the continuing growth in infrastructure developments in the UAE, demand for all types of trucks is strong, and transport company owners look to buy OEM brand parts from the local aftermarket.
Steps to start a spare parts business in the UAE
Setting up a spare parts business in the UAE requires certain steps to be followed.
The first step is to decide on the business activities that the company will engage in. Here, entrepreneurs need to decide exactly what will be done – such as whether it will be a physical shop trading in auto parts, an online business doing the same, or something else. The list of business activities must be prepared before the business can trade.
Another early and important step is to decide on a name for the business. There are certain rules in the UAE that entrepreneurs must be mindful of. For instance, the name cannot be the same as one used by an existing business in the UAE. In addition, it should not contain any blasphemous or offensive language or have any religious connotations.
Next, the location of the business must be finalised. This detail is critical and will depend on your requirements – think about the potential footfall in an area, access to transport (for customers and employees), the demography of your customers, accessibility, etc. There are also the various business zones to consider – in Dubai, you can establish your company in a free zone or on the mainland, and both have advantages.
After this, a series of certificates and licences are required. These include a pre-approval certificate and a legal trade licence – either professional or commercial, depending on your business’ activities.
Finally, you need to ensure all relevant visas are in place, whether it is yours, or for family, business partners or employees – this can make the set-up process easier to complete.
If you need to apply for a visa, the process includes making an application for an entry permit, passing a medical test, submitting your Emirates ID registration and ensuring your visa is stamped by the relevant authorities.
This process can get complicated, and any mistakes could mean the formation process takes longer, resulting in more time before you can get down to trading and making money. It is therefore advisable to engage a company formations specialist such as Worldwide Formations, which can help entrepreneurs negotiate the process swiftly and efficiently. For more information, contact us.
Documents required to start a spare parts business in the UAE
Various documents will need to be submitted as part of the business set-up process before you start your spare parts business in the UAE.
Documents required include the registration application form, along with the receipt of the fee for the initial approval certificate. Agreement for a lease on premises is also required, as is a memorandum of association and partnership agreement.
Personal documents needed include copies of the passport of every business partner and/or owner of the business and a NOC in cases of being resident in Dubai, which is given by the employer.
Cost of setting up a spare parts business
Numerous costs must be considered when setting up a spare parts business in the UAE. One of the bigger costs is the trading licence, which will set you back anything from AED 10,000 to AE 40,000 depending on the size of the business and the activities it undertakes.
Other significant costs will include the cost of buying or renting premises and furnishing them, buying in equipment and stock, and customs taxes, which will have to be paid if you are planning to import products. Employees are another cost to consider if you are planning to directly employ people or use contractors.
How Worldwide Formations can help
As this article has shown, setting up a spare parts business in the UAE can be profitable, but the setup process can be complex, especially for someone new to the UAE or who has not started a business in the area before. This is where consultants such as Worldwide Formations can assist entrepreneurs.
Worldwide Formations is vastly experienced in business setup in the UAE, and, with their detailed local knowledge, our consultants can navigate the complexities with skill and speed to ensure your business is fully set up and legally compliant as soon as possible.
To find out more about how Worldwide Formations can help and to obtain a personalised quote, please contact us today.
