The Road To Profit

Luxury carmakers are reluctant to admit it but the UAE and its Gulf counterparts are propping up their global sales. While the Western world writhes in economic agony, more and more Gulf car enthusiasts are splashing out on
stylish vehicles.

For Europe and the US, the year ahead is likely to bring more negative debt crisis news, a controversial presidential race and high oil prices, all of which could dent auto sales one way or another.

Meanwhile, the Gulf’s luxury car segment will likely double in size between now and 2015, according to research firm IHS Automotive, with the UAE currently the biggest market in the region.

“There’s no doubt that the ultra-high end customers, including Gulf royalty, will keep buying luxury cars. When they get all this money from oil they spend it,” said Pierluigi Bellini, associate director of Middle East at IHS Automotive. “The Middle East, along with China and Asia in general are all compensating for the slower Western markets. Even though the share of the market is small, the volumes are huge and they can more than pick up the slack in growth.”

Rolls-Royce’s growth last year summed up the trend. Sales to wealthy motorists in the region jumped 23 per cent and in June it opened a dedicated regional office in Dubai. Previously, the region was served from Europe.

Strong demand for bespoke modelling is sustaining record growth, says James Crichton, regional director for the Middle East and Africa at the British luxury carmaker. “People in the Gulf don’t want to drive home and find their neighbour has the same car. It’s about creating something that feels brand new.”

The firm’s Ghost and Phantom models are most popular for customisation.

“In the last two years every Phantom has had elements of bespoke work done to it,” said Crichton. “Our dealers do a lot of work creating unique one-off designs with our Goodwood facility in the UK and display them in showrooms there. We also take a select few to the Goodwood plant so they can sit with our designers there.”

He admits that the effects of the Arab Spring and the US credit rating downgrade last year did hit sales in the Middle East. And he is more “cautious” in 2012 over economic uncertainties coming out of Europe.

Indeed, the road ahead is likely to be bumpy at worst this year. Some say that luxury carmakers need not panic because fundamentally there’s a deeper cultural connection at work for Gulf Arabs; it’s almost like an extension of the ego, the argument goes.

Whatever the reason, the world’s top auto industry names are throwing everything they have at the UAE.

Audi is currently building its biggest showroom on Dubai’s Sheikh Zayed Road in anticipation of growth. Still, Jeff Mannering, managing director of Audi Middle East, offers some balance: “We sold 1.3 million cars last year, 8,000 of which were in the Gulf. To say that the region is compensating for slower growth elsewhere would not be true. Although if our sales in Europe completely collapsed I’m sure there would be cars floating around that we
could shift to other markets.”

Audi Middle East sold 7,865 vehicles in 2011, eclipsing 2010 by 26.8 per cent. The UAE saw the highest sales with 40 per cent of total regional sales with 3,137 units.

Although there are some efforts to downplay the importance of the UAE and surrounding region, luxury carmakers will be quietly breathing a sigh of relief that the numbers are so positive. In the face of depressing economic news out of Western markets, they will be betting that the Gulf’s love affair with luxury motoring continues.