Mother-of pearl dashboards and diamond-encrusted hood ornaments at the Dubai International Motor Show this week underlined how the safe-haven status of the United Arab Emirates is fuelling dramatic growth in sales of luxury cars.
The market was hit hard by the 2008-2009 global financial crisis and recovered only partially last year. But this year's political unrest in the Arab world boosted sales in the UAE, which was spared such turmoil. Companies and individuals from around the region looked for a safe haven in Dubai, a key Gulf business hub.
The uprisings...have provided confidence that Dubai is important from a security point of view, said Michel Ayat, chief executive of AW Rostamani Automotive, which sells Nissan's (7201.T:Quote, Profile, Research, Stock Buzz) luxury Infiniti models.
With Brent oil prices above $100 a barrel, promising continued economic growth for the UAE, a debt crisis in Europe and financial stormclouds in the United States have also largely failed to deter wealthy consumers. The UAE economy is expected by analysts to grow about 3.8 percent this year.
The crisis is everywhere. (But) even if the local has nothing to eat, that's no problem if he has a luxury car, joked Emirati businessman Salem Seif, 28, eyeing a new Porsche Cayenne sport utility vehicle at the motor show.
Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) in Dubai sold 211 new cars in August, the best-ever performance for any Porsche showroom globally, with the Cayenne remaining the brand's top seller. Sales for the first eight months of this year are up 46 percent from a year earlier, said Vijay Rao, the showroom's general manager.
In the UAE, the Gulf's largest market for luxury cars, total sales are expected to jump 32 percent to 25,010 this year after a 16 percent rise in 2010, consultants IHS Automotive forecast.
That would be the fastest growth in the Gulf and exceed volumes seen in the oil-boom years before 2008, when access to credit was easier. Luxury cars account for 9 percent of the country's car sales.
And many of them are being bought by young customers just getting a taste for such vehicles; some 66 percent of all new car purchases in the UAE, which has the world's sixth highest per capita income at over $47,000, are made by customers between the ages of 18 and 29, according to Business Monitor International.
A moderate economic slowdown looks likely in the UAE next year if the global outlook worsens, and this could cool the luxury car market. Dubai's safe-haven effect may also fade as partial political stability returns to other Arab countries; in the last few months, rapid growth in deposits at UAE banks has slowed, central bank data shows, suggesting there are no longer big inflows of foreign money seeking a refuge from political turmoil.
Ayat estimated the luxury segment of the UAE car market would grow around 15 percent next year, but that is more optimistic than the 8 percent growth forecast by IHS. Gulf car sales data are not available on an aggregate basis, posing a challenge to industry forecasters.
Overall UAE passenger car sales of all types are expected to rise 15 percent to 273,924 this year and climb a further 13 percent in 2012, after a 6 percent increase last year, IHS said.
Even if growth in the luxury market does slow, the top-end brands such as Rolls-Royce (BMWG.DE: Quote, Profile, Research, Stock Buzz), which sells cars priced above $270,000 mainly to royalty and expatriate entrepreneurs, may see little impact.
In the third quarter this year, with the problems in the euro zone, the market slowed down a little, but let's emphasise that we will still continue to see growth in the market compared to 2010, said James Crichton, Rolls-Royce Motor Cars' regional director for the Middle East and Africa.
In the UAE, we are up 78 percent this year, and in Saudi Arabia we are up almost 60 percent, he said at the motor show, where the automaker displayed its blue and white Riviera Phantom with the iconic flying lady figurine, covered in 2,300 diamonds, perched on its brushed stainless steel bonnet.
Home to some 5.4 million people, the UAE is the world's fourth-largest market for Rolls-Royce.
There is a crisis and tension around the globe but people who are luxury spenders by nature, they will continue to spend, said Adham Charanoglu, chief executive of Aston Martin Middle East and North Africa.
This is completely separate from the retail market, he said at the launch of the $530,000 Aston Martin Zagato in Dubai.
Car sales trends diverged in the Gulf in 2011. In Bahrain, hit by the worst political unrest since the 1990s, luxury car sales are projected to fall 19 percent this year before rebounding 20 percent next year, IHS said.
Oil giant Saudi Arabia, which saw only minor political protests, is forecast to see a 4 percent drop in high-end sales this year before growth takes off strongly -- at a 24 percent clip -- in 2012. That would far exceed the 8 percent rise predicted for overall Saudi car sales next year.
Dealers see potential for further growth if the kingdom eventually allows women to drive. In September the government decided to let women vote in municipal elections, a step which could presage further social change.
In Saudi Arabia, 20 percent of our customers are women, and the number is increasing, said Umberto Cini, managing director at Maserati Middle East and Africa. At present, women are driven by relatives or chauffeurs.