Lebanon: Excessive taxes put the brakes on super-car sales

Executive magazine

There are around 200 super cars in Lebanon tucked away in garages, strategically parked by valets outside high-end night spots and, on occasion, swerving around suspension-wrecking potholes on Lebanon’s mountain roads. In the summer months, a further 100 Lamborghinis, Ferraris and Maseratis with Gulf license plates are to be seen zipping around town, the cars having been sent ahead by container ship for their holidaying owners.

Luxury cars are a tiny niche market and are likely to remain so due to the high level of cumulative taxation levied on imports, value-added tax (VAT) and registration, starting at 60 percent of the car’s value, and at its highest exceeding 70 percent. Given such costs, it is little surprise that owners of such vehicles are part of a very exclusive club. But that does not mean there is no demand.

“We would double or triple sales of luxury cars if taxes were reduced,” said Michel Trad, director of Saad and Trad, dealership for Lamborghini, Bentley, Jaguar and, as of this year, McLaren. Sales would also be made not just to Lebanese buyers, who are “99.9 percent of clients” in the luxury segment, added Trad.

Expatriate Lebanese and frequent visitors with cash to burn would undoubtedly boost sales, allowing dealerships such as Saad and Trad to shift more than the one Lamborghini sold over the past year, or the 17 Bentleys, nine Aston Martins and 27 Maseratis purchased by wealthy Lebanese. Indeed, at the height of the economic boom in the United Arab Emirates, Lamborghini alone sold 60 models in 2008.

As Nabil Bazerji, dealer for Maserati, noted, “sales are always to the Lebanese, as luxury cars are highly taxed, so foreigners are not happy to pay that and they bring over their cars, especially the Gulfies as taxes are much lower there on high-end cars.”

The joys of mountain roads

The fact that British super car manufacturer McLaren selected Beirut as one of its regional hubs as part of its global expansion gives some indication of its potential as a luxury car market. “There are very few McLaren dealers as the network is not finished yet,” said Trad. Indeed, while Saad and Trad joined other dealerships in Jeddah, Riyadh and Doha in having joint Lamborghini-McLaren showrooms, the McLaren MP4-12C super car has yet to be launched in Beirut, with New York, London and Dubai up first before the car will grace the roads of Lebanon.

While there is a lot of competition in the luxury car segment to get the country’s few affluent car aficionados to splash out on a new set of wheels, it is Lebanon’s position as a window display of the latest trendy products that gives the nation a special significance for luxury car brands.

“A lot of people summer here so Beirut is important for visibility, and [since] people come from the GCC. We have double the business at our repair center in the summer as our after sales department is well equipped and we have the only aluminum body repair shop in Lebanon,” said Trad.

Further reflecting Lebanon’s marketing importance, in May the country was chosen by Bentley to host a Beirut Drive day for VIP guests to test drive the Flying Spur, Supersports and Mulsanne models on the roads to Beit Misk and Broumana in the hills above the capital.

“Why pay millions to hire a circuit when you can just do it on the roads?” said Trad of the event. “Circuits are boring, and the conditions of the roads here add to the driving experience. In Dubai you go straight and then stop. The configuration of mountain roads is much better. My customer is Lebanese, not a foreigner coming here that doesn’t know about the road conditions or how to drive in Lebanon.”

The Trofeo Cup

While Bentley opted for the everyday extreme driving of Lebanon’s roads to showcase its latest models, Italy’s Maserati has gone for extreme speed to show off the new GranTurismo. For the first time outside of Europe, the brand has organized the Maserati GranTurismo MC Trofeo race in the Middle East for what Bazerji calls “gentlemen drivers and rookies.”

Running from October until April 2012, the cup allows drivers that stump up to $135,000 to rent the racing version of the GranTurismo for the season to compete with up to 16 identical versions of the car in more than seven races, from the Formula One tracks in Abu Dhabi and Bahrain, to Qatar’s Lusail Circuit and the Dubai Autodome.

“The purpose is to initiate people into safer driving, the pleasure of a luxury car and the driving experience,” said Bazerji.

The new GranTurismo MC Stradalé was launched in May, “despite what’s happening in the neighboring countries and the economic and political crisis in Lebanon,” added Bazerji. “We hope to exceed a sales mix of 20 to 24 Maseratis this year. But if the government reconsiders taxation and reduces it, the luxury segment should grow considerably.”