The ongoing conflict between Iran and Israel is threatening one of the most profitable markets for luxury automakers, putting a damper on sales of high-end vehicles that can cost millions of dollars.
Just weeks before the war erupted on February 28, Rolls-Royce had unveiled its custom Phantom Arabesque model in Dubai, featuring intricate laser engravings inspired by Arabian design and matching wooden interior details. The luxury vehicle was created specifically for a Dubai client and showcased at the brand’s newly opened second showroom in the city.
The Middle East represents less than one-tenth of total sales volume for most premium car manufacturers, but the region delivers profits that far exceed its size due to wealthy customers who pay premium prices for customized features.
While a basic Rolls-Royce Phantom carries a price tag of approximately $572,416, Gulf buyers often request personalized modifications that can double or even triple that amount.
“It’s the best market in the world,” Bentley’s CEO Frank-Steffen Walliser commented about the Middle East earlier this month.
However, the outbreak of hostilities forced many luxury car dealerships across the Gulf to temporarily shut down. Both Ferrari and Maserati suspended vehicle deliveries during the initial weeks of conflict, though both companies report their showrooms have since resumed operations.
Rolls-Royce, which is owned by BMW, stated in an email that the company is “closely monitoring” developments in the Middle East region.
“Given the fluidity of the situation, it would be premature to speculate on longer-term impacts,” the automaker responded.
F1rst Motors in Dubai, which carries all major luxury automotive brands, closed temporarily when the conflict began but has since reopened its doors. The dealership specializes in Ferraris and Bugattis, with inventory ranging from $250,000 vehicles up to $14 million supercars.
Director Chris Bull reports that business has declined roughly 30% since reopening, though sales of vehicles exceeding $1.4 million have stabilized and international sales outside the UAE remain strong.
“Obviously, there are fewer people walking in the front door … But we’re still managing to maintain a good level of business,” Bull explained, noting that some customers will spend up to $34,512 just to have a $7 million vehicle transported out of the country.
Multiple luxury brands including Lamborghini, Ferrari, Jaguar Land Rover, and Porsche are monitoring the situation closely, hoping for a quick resolution to the conflict.
“It’s very high margin,” Volkswagen CEO Oliver Blume said regarding Middle Eastern sales during a recent media briefing, adding about the Iran conflict: “We will see an impact there for sure.”
While most luxury manufacturers don’t publish regional profit breakdowns, Ferrari disclosed that Middle East sales comprised 4.6% of its total volume last year, surpassing its China sales and up from 3.5% in 2024. A Ferrari representative said regional sales remain stable currently.
The Middle East market is characterized by exclusive limited editions that command substantial premiums for special features like exotic wood trim, mother-of-pearl accents, or gold leaf finishing.
Last year, Jaguar Land Rover sold 20 special “Sadaf” edition Range Rover Sport SV models for about $440,000 each – roughly triple the standard UK price.
Andy Palmer, former CEO of Aston Martin, recalled that during his leadership, the company would immediately contact Middle Eastern collectors when offering high-profit special editions.
“You almost didn’t need to ask,” Palmer told reporters.
Industry executives say this lucrative custom vehicle business in the region has essentially stopped.
“People in the Middle East have other thoughts than looking for a new Bentley at the moment,” CEO Walliser observed.
The Middle East disruption comes as luxury automakers face challenges across multiple markets. US sales have been affected by tariff uncertainties, while demand has dropped significantly in China and Europe, leaving few growth opportunities and forcing some manufacturers to consider production cuts.
Bentley’s sales dropped 5% last year even before the Iran conflict began, though CFO Axel Dewitz told media this month that production cuts aren’t currently necessary.
“However, if the current crisis endures for a couple of weeks, I think we would need to revisit the situation,” he stated.
Lamborghini CEO Stephan Winkelmann said this month his company has encountered numerous obstacles since the COVID-19 pandemic, noting that “there is no new American market out there that we can tap into to boost our sales volumes.”
Russian sales ended after Moscow’s 2022 invasion of Ukraine, the Chinese luxury market has “collapsed,” tariffs have affected the crucial US market, and now Middle Eastern business has stalled, he explained.
For former Aston Martin chief Palmer, the current situation is unprecedented.
“For a manufacturer of premium and luxury cars in particular, it’s an utter disaster.”
