BY COMFORT OGBONNA
A laser-engraved hood inspired by traditional Arabian architecture and a carefully crafted wood-trim interior were among the extravagant features showcased in a one-off Phantom Arabesque model created by Rolls-Royce Motor Cars for a private customer in Dubai. The car, unveiled earlier this year, represented the height of bespoke luxury—tailored specifically to the tastes of wealthy buyers in the Gulf region.
The exclusive model was revealed in February, shortly before tensions surrounding the Iran war 2026 escalated, sending shockwaves across the Middle East. The timing has raised concerns for luxury automakers that rely heavily on the region’s affluent clientele, as geopolitical instability threatens one of the most profitable markets for high-end vehicles.
Although the Middle East typically accounts for less than 10% of sales for most luxury car manufacturers, it delivers disproportionately high profits. Wealthy customers in the Gulf often request extensive customization packages that significantly increase the final price of already expensive vehicles.
A standard Rolls-Royce Phantom begins at roughly £430,000 (about $572,000), but bespoke options frequently push the price far higher. In some cases, personalized features—from rare materials to unique design elements—can double or even triple the cost of the vehicle. These commissions have long made the region one of the most lucrative markets for luxury automakers.
Rolls-Royce, owned by Germany’s BMW, unveiled the Phantom Arabesque only a week after opening its second showroom in Dubai. Soon afterward, U.S. and Israeli strikes on Iran—and Iran’s retaliatory actions across the Gulf—sparked regional uncertainty that quickly rippled through the luxury car industry.
The Middle East’s importance to the sector is widely acknowledged. Earlier this month, Frank-Steffen Walliser, chief executive of Bentley Motors, described the region as “the best market in the world” for high-end automobiles.
However, the conflict has disrupted business operations. Several luxury dealerships across the Gulf temporarily shut down after fighting broke out on February 28. Deliveries were paused by automakers including Ferrari and Maserati, a brand owned by Stellantis. Both companies have since reopened their showrooms, but uncertainty remains.
Rolls-Royce said in an emailed statement that it is “closely monitoring” the evolving situation in the Middle East.
“Given the fluidity of the situation, it would be premature to speculate on longer-term impacts,” the automaker said.
In Dubai, luxury dealership F1rst Motors briefly closed its showroom during the initial days of the conflict before resuming operations. The dealership is known for its inventory of rare and ultra-expensive vehicles, including models from Ferrari and Bugatti.
Director Chris Bull said the dealership sells vehicles ranging from about $250,000 to as much as $14 million. Since reopening, overall business has fallen by roughly 30%, reflecting a drop in foot traffic and cautious spending among buyers.
“Obviously, there are fewer people walking in the front door,” Bull said. “But we’re still managing to maintain a good level of business.”
He added that demand for ultra-high-end vehicles—priced above $1.4 million—has stabilized somewhat. In addition, international sales remain strong, with some buyers willing to pay up to €30,000 to transport a $7 million car out of the United Arab Emirates.
Other luxury brands are also watching developments closely. Automakers such as Lamborghini, Ferrari, Jaguar Land Rover, and Porsche—part of the Volkswagen Group—all depend on wealthy Middle Eastern customers for a portion of their high-margin sales.
Oliver Blume, CEO of Volkswagen Group, acknowledged that the region plays an important role in profitability. Speaking during a media briefing earlier this month, he warned that the conflict could inevitably affect sales.
“It’s very high margin,” Blume said of Middle East business, adding that the Iran conflict will “certainly have an impact.”
While many luxury manufacturers do not disclose profit margins by region, some sales data illustrates the market’s importance. Ferrari reported that 4.6% of its total deliveries last year went to the Middle East—more than it sold in China. The share also increased from 3.5% in 2024, reflecting growing demand in the region before the recent conflict.
The Gulf market is particularly known for limited-edition vehicles designed specifically for local buyers. These special runs often feature rare materials such as exotic woods, mother-of-pearl inlays, or even gold leaf detailing, allowing automakers to charge significant premiums.
For example, in 2024, Jaguar Land Rover sold just 20 units of the “Sadaf” edition Range Rover Sport SV at prices around £330,000 each—roughly three times the model’s base price in the United Kingdom.
Former Aston Martin CEO Andy Palmer said wealthy collectors in the Middle East were often the first to receive offers for these special editions because of their willingness to pay for exclusivity.
“You almost didn’t need to ask,” Palmer said, referring to the strong demand among Gulf buyers.
Today, however, that lucrative bespoke market has slowed dramatically. Industry executives say many wealthy customers are delaying major purchases while the regional situation remains uncertain.
“People in the Middle East have other thoughts than looking for a new Bentley at the moment,” Bentley’s Walliser said.
The slowdown comes at a difficult time for the luxury automotive industry globally. Sales in the United States have been clouded by uncertainty over tariffs, while demand in both China and Europe has weakened significantly.
As a result, many high-end manufacturers are increasingly dependent on a small number of profitable markets. Some companies are even considering reducing production if demand continues to soften.
Bentley’s sales declined 5% last year, although chief financial officer Axel Dewitz recently said the company does not yet plan to cut output.
“However, if the current crisis endures for a couple of weeks, I think we would need to revisit the situation,” Dewitz said.
Stephan Winkelmann, CEO of Lamborghini, noted that the luxury sector has faced a series of setbacks since the COVID-19 pandemic.
“There is no new American market out there that we can tap into to boost our sales volumes,” he said.
Luxury car sales in Russia collapsed following the Russian invasion of Ukraine in 2022, while the premium car market in China has weakened sharply. Tariffs have also complicated sales in the United States—Lamborghini’s most important market.
Now, with the Middle East experiencing instability, another key pillar of demand has been shaken.
For former Aston Martin chief Palmer, the convergence of these challenges has created an unprecedented situation for the luxury car industry.
“For a manufacturer of premium and luxury cars in particular,” he said, “it’s an utter disaster.”
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