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Here, SUV Sales Are Soaring

In the oil-rich Persian Gulf, costly fuel boosts demand for the big vehicles, which account for a third of all autos sold in the region.

November 24, 2005|From Associated Press

DUBAI, United Arab Emirates — Sales of sport utility vehicles in North America and Europe have been crippled by soaring fuel prices, with some saying the SUV's demise as a family car is nigh.

Not so in the Arab lands of the Persian Gulf.

About a third of the vehicles on the road in Saudi Arabia, United Arab Emirates, Kuwait and the rest of the gulf are SUVs. Despite fuel prices, which have risen even in some parts of the land of oil, SUV sales are shooting through the roof, with yearly increases jumping by double digits in most places.

And buyers here want their 4x4s big, with V-8 engines, seating for seven or more and as much gasoline-sucking air conditioning as possible.

"Our business is booming at the moment," said Julian White, who heads sales for Dubai-based 4x4 Motors. "It's actually affecting our stock levels. It was the busiest summer in my six years here. This is the first place I've ever sold cars where no one asks about fuel consumption."

Motorists here want four-wheel drives mainly because they are perceived as safer on roads plagued with some of the world's most reckless drivers.

Dealers and automakers say there also is a prestige factor to owning a flashy SUV, and the gulf countries -- especially the Emirates -- have become important markets for the high-priced Porsche Cayenne and BMW X5 from Germany.

"We have a family of four, so we need a big car," says Mojgan Bahmanyar, 43, an Iranian architect and mother of two who has lived in Dubai for eight years.

"It's much safer," said Bahmanyar, who drives a Land Cruiser Prado from Toyota Motor Corp., a model not sold in North America. "It's big, so everybody is scared of it."

Size is key. General Motors Corp. expects 2005 Middle East sales of its nine-seat GMC and Chevrolet Suburbans and its GMC Yukon and Chevy Tahoe to soar 51% from last year, pushed by frantic sales in the biggest regional market -- Saudi Arabia.

"It's a record year for us when it comes to large sport utilities," said Samer El-Khalil, Dubai-based marketing manager for GM's SUV business in the Middle East. "You can't compare what's happening in this region to what's happening in North America."

Nissan Motor Co. says it can't ship enough units of its massive Armada 4x4, with its 5.6-liter V-8, to keep up with sales in the six Arab states of the Gulf Cooperation Council trade area: Saudi Arabia, Kuwait, Oman, Bahrain, Qatar and the Emirates.

"There's a waiting list of two months," said Tariq Danish, Nissan's SUV brand manager for the Middle East.

Maybe Nissan dealers in the U.S. could ship over some unwanted vehicles. In North America, Armada sales dropped 23% in October, compared with the same month last year.

GM, Ford Motor Co. and Nissan all reported big October sales declines in America, with SUVs taking the biggest hit. Sales fell 50% or more on Ford's Explorer and Lincoln Navigator; GM's Hummer H2 and GMC Yukon; and Toyota's Land Cruiser. High oil prices were cited as a chief reason.

But the same oil price hike is driving 4x4 fever in the Persian Gulf. Oil revenue in the six gulf council countries is expected to reach almost $300 billion this year, up from $61 billion in 1998.

As oil wealth trickles into every aspect of life here, council governments subsidize pump prices. There are few places where owning a car is so cheap.

In the Emirates, a gallon of gasoline costs $1.70. In Saudi Arabia, fuel costs about $1 a gallon, and in Kuwait, the price is about 83 cents. In the United States, the average pump price reported Monday was $2.201 a gallon, up 25.3 cents from a year earlier and a record for the Thanksgiving holiday week.

Along with the economic boom, auto sales have risen more than 6% a year in the gulf region and almost 10% in the Emirates, the Abu Dhabi Chamber of Commerce and Industry said.

SUV sales in the Mideast will not be enough to buck up the 4x4's fading fortunes. The gulf market is about 5% the size of America's, with about 700,000 vehicles expected to be sold in 2005, compared with about 14.7 million in the U.S. The region could even see automakers quashing production of some models that hold the most local popularity.

In the energy-rich gulf states, SUVs have a long history that harks back to when they replaced camels for overland trips.

The Toyota Land Cruiser outsells all others in the region, accounting for 18% of 2004 Mideast sales for Toyota, the Middle East's top manufacturer.

GM too has its niche in Saudi Arabia. Company data show that SUVs made up 25% of its overall sales in North America but 40% of its Mideast sales in the last year.

"This is probably the only market in the world where you'll see growth in large and medium SUVs," El-Khalil said. "It's double-digit growth."

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