Car prices around the world, including in the UAE, have always been influenced by multiple factors such as demand, government policies, and production costs. However, one of the most significant influences in recent years has been the global supply chain. From raw material shortages to shipping delays, supply chain challenges have reshaped how much buyers pay for both new and used cars. Understanding how the supply chain affects car prices helps buyers make informed decisions and gives insight into why prices rise or fall unexpectedly.
What is the Automotive Supply Chain?
The automotive supply chain is a complex network that includes raw material suppliers, manufacturers, assembly plants, logistics companies, and dealerships. To produce a single vehicle, parts are sourced from multiple countries—steel from Asia, chips from Taiwan, engines from Europe, and interiors from the Middle East. Once assembled, cars must be shipped to global markets. Any disruption in this chain, whether at the production stage or transportation stage, directly impacts car availability and prices in showrooms.
The Role of Raw Material Prices
One of the biggest cost drivers in car production is raw materials. Steel, aluminum, rubber, and plastic are essential components in almost every vehicle. When global prices for these materials rise due to shortages or increased demand, car manufacturers pass the costs down to consumers. For example, if the price of steel surges by 20%, manufacturers face higher production expenses, which often results in higher car prices in the UAE and other markets. Conversely, when raw material prices stabilize, car prices tend to ease slightly.
Semiconductor Shortage and Its Impact
Modern cars rely heavily on semiconductors, which power everything from navigation systems to advanced driver-assistance features. The global semiconductor shortage that began in 2020 highlighted how critical supply chains are to the automotive industry. Production delays meant fewer cars rolling off assembly lines, creating a supply-demand imbalance. As a result, car prices soared in many markets, including Dubai, Abu Dhabi, and Sharjah. Even in 2025, semiconductor supply continues to affect car pricing, especially for models with advanced infotainment and electric systems.
Shipping and Logistics Costs
Transporting cars from factories to dealerships is another major factor in final pricing. Shipping costs have increased dramatically in recent years due to port congestion, container shortages, and rising fuel prices. For cars exported to the UAE from Asia, Europe, or the United States, higher shipping fees directly translate into more expensive showroom prices. Similarly, delays in shipping schedules reduce supply, which pushes demand up and further inflates prices. Roll-on/Roll-off (RoRo) and container shipping remain the primary methods, but fluctuations in freight rates heavily influence what buyers eventually pay.
Global Events and Disruptions
Supply chains are highly sensitive to global events such as pandemics, geopolitical tensions, or natural disasters. For instance, the COVID-19 pandemic disrupted factories and shipping lines worldwide, leading to fewer available cars and skyrocketing prices. Political instability or trade restrictions between countries can also cause delays or increase tariffs, which directly affect pricing. Even regional events, such as the Suez Canal blockage in 2021, had ripple effects on car delivery timelines and costs across global markets.
Impact on New vs. Used Car Prices
Interestingly, supply chain issues affect new and used car markets differently. When new car production slows down due to supply shortages, buyers turn to the used car market. This sudden surge in demand pushes up the prices of second-hand vehicles. In Dubai and across the UAE, used car prices rose significantly during semiconductor shortages because buyers could not wait months for new car deliveries. Thus, disruptions in the supply chain indirectly make used cars more expensive as well.
Regional Differences in Supply Chain Effects
The impact of supply chain disruptions is not the same everywhere. In the UAE, where the car market depends heavily on imports, global delays have an amplified effect. A shortage of vehicles in Europe or Asia directly limits availability in Dubai showrooms, pushing prices higher. On the other hand, countries with local manufacturing plants may experience smaller price hikes since they rely less on imports. This regional variation is why car prices in the UAE can sometimes differ significantly from neighboring countries.
How Manufacturers Are Responding
Car manufacturers are adapting their strategies to mitigate supply chain risks. Many are diversifying suppliers, increasing local production, and investing in alternative shipping routes. Some are also simplifying car models by reducing dependency on semiconductors or offering fewer customization options to speed up production. While these measures help stabilize supply, they also change how cars are priced and marketed. In the UAE, this has led to faster deliveries for popular models but often at a higher cost compared to pre-crisis levels.
What Buyers Should Know
For car buyers in Dubai, Sharjah, and Abu Dhabi, it is important to recognize that supply chain challenges are likely to continue influencing car prices in 2025 and beyond. Buyers should compare both new and used options, monitor seasonal promotions, and consider flexible financing options to manage higher prices. Exploring hybrid and electric vehicles may also provide long-term savings, as these cars often come with government incentives and lower maintenance costs. Most importantly, patience and timing can make a big difference—waiting a few months during peak supply chain disruptions may result in better deals later.
Conclusion
Car prices are no longer determined solely by dealership competition or consumer demand. The global supply chain—covering raw materials, semiconductors, shipping, and logistics—plays a crucial role in shaping what buyers pay. Disruptions in this chain ripple through the entire market, raising both new and used car prices, especially in import-dependent regions like the UAE. By understanding how supply chains affect car pricing, buyers can make smarter decisions and prepare for the realities of today’s automotive market.
