June 23, 2008 / 12:07 AM / in 9 years

Big cars rule Gulf roads amid record oil prices

<p>A Saudi man walks into a car showroom in Riyadh in this picture taken March 20, 2005. REUTERS/Zainal Abd Halim</p>

DUBAI (Reuters) - Luxury sports cars, gas-guzzling SUVs, even tank-like Hummers all jostle for space on Gulf highways, their owners buoyed by record oil prices that have forced some motorists to ditch cars for bicycles in the West.

Not only has government-subsidized gasoline prevented motorists in the Gulf Arab region from feeling the pinch at the pump, but windfall revenues from $140-a-barrel oil have fuelled an economic boom and put deluxe cars in more people’s reach.

“High oil prices are feeding into the economy, so more people have higher incomes, so more people buy luxury cars,” said Julian Millward-Hopkins, Middle East and Levant press manager for German luxury brand Mercedes-Benz.

“If you look at sales worldwide it is a pyramid. At the bottom are smaller cars and at the top are luxury sports cars. In the Middle East it’s an inverted pyramid. Luxury cars do proportionately better here than elsewhere.”

Custom-made Rolls-Royces, stretch-Hummers with blacked-out windows and bright red Maseratis line the entrance to Dubai’s Mall of the Emirates, but even in the drabbest parts of town four-wheel-drives rule the roads.

Luxury cars are so in demand given the tax-free Gulf prices that motorists with cash to flash must join long waiting lists for the most prestigious models, sometimes waiting a year for delivery.

BOOMING DEMAND

The booming luxury car market in the Middle East, where sales of Mercedes-Benz rose 31 percent in May on the same month last year, comes in stark contrast to the recession fears gripping the United States, Europe and parts of Asia.

Oil exporters and consumers meet in Saudi Arabia on Sunday seeking to curb prices that have provoked protests from Brussels to Bangkok, threatening to throw the world economy into turmoil.

In the United States, 95-octane gasoline is selling for around $4 a gallon at the pump, but in the United Arab Emirates, where it still costs around $0.36 a liter, fuel-efficiency is the last thing on motorists’ minds.

“People very rarely ask about fuel-efficiency to be honest,” said one salesman at a luxury car showroom in Dubai. “It is just not an issue for people here.”

Ford is idling a U.S. plant manufacturing sports utility vehicles (SUV) for nine weeks due to declining demand.

General Motors is closing four U.S. truck plants and may sell Hummer -- the military-derived vehicle synonymous with gas-guzzling excess -- as Americans stung by rising gasoline prices choose smaller, more economical vehicles.

Yet Middle East sales of General Motors’ full-size SUVs grew 40 percent in the first quarter of this year, bought by everyone from families seeking big vehicles to young men seeking rugged cars to take off road. That compares to overall sales growth of 6 percent in the Middle East in the same period.

“This market is buoyant in the large SUVs and premium cars,” said John Passadis, Middle East director of sales at General Motors, which also represents GMC, Chevrolet and Cadillac.

“The price of fuel is still at a level where it does not impact you that much so you can have a large capacity engine.”

You can drive around twice as far on one gallon of fuel in Ford’s dinky Focus car, as you can in a Hummer H3 or a Toyota Land Cruiser, ubiquitous on Gulf highways.

“I would not drive this kind of car in England,” said Henry Charles, a Dubai-based consultant. “It is not just the high fuel consumption. Cars are also much cheaper here.”

Editing by Charles Dick

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