Iran war poses challenges to high-margin Middle East car market
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A continuing Iran war could destabilize the larger Gulf region, an increasingly important profit center for luxury automakers challenged elsewhere.
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In this article RACE-IT Follow your favorite stocks CREATE FREE ACCOUNT watch now VIDEO 4:11 04:11 How the Iran war threatens increasingly important Middle East car market Autos The instability brought on by the Iran war and rising geopolitical tensions pose a threat to automakers with a presence in the Middle East. European luxury and high-performance brands such as Porsche , Mercedes-Benz , BMW , Rolls-Royce and Ferrari all have had thriving businesses in the Middle East market that, in terms of volume, is less than a fifth of the United States but that punches above its weight in terms of profits. "The Middle East has recently become one of the highest-margin structural growth regions for premium automakers," said Metzler Research analyst Pal Skirta. Those automakers have been faced with declining market share in China and tariffs in the United States, two countries that are among the most important luxury buyers in the world. That has increased the importance of profitable centers like the Middle East as automakers. The Middle East region, depending on which countries are included, has an annual volume of about 3 million vehicles. Iran is the biggest market in the region, making up 38% of its total, according to Bernstein Research. Two of the top three biggest sellers are domestic car brands Iran Khodro and SAIPA, which only sell in Iran. Other high-volume brands include Japanese carmaker Toyota, Korea's Hyundai, and Chinese maker Chery. Luxury demand is higher in nearby Gulf markets such as Saudi Arabia and the United Arab Emirates — which have a high concentration of wealthy buyers with money to spend, according to GlobalData analyst Vivek Sharma. The UAE alone typically exceeds 300,000 vehicles annually in sales and a relatively high share of that, or about 20%, is premium imports, according to GlobalData. The ripple effects of the Iran war across the region threaten these automakers. Volkswagen Group CEO Oliver Blume said in mid-March that the conflict in th...
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