LONDON - The Middle East was just beginning to pull out of its automotive sales slump when the war began in Iraq.
Turkey's economic meltdown and Israel's struggle on the West Bank caused a sharp downturn from the region's sales peak of 1.3 million in 2000. Now hostilities threaten to brake the region's growth.
War or no war, Iran quietly has become the region's largest automotive market, while the oil-rich Arabian Peninsula countries continue to have an appetite for cars and trucks. Here is a thumbnail sketch of the region.
"There were a succession of crises," says Carol Thomas, analyst for JD Power-LMC in London. "Interest rates shot up, and there was a continuing erosion of disposable income."
With an economic crisis in full swing at home, manufacturers in Turkey are focusing on export markets. Turkey has become a rival to eastern Europe as a magnet for investment in assembly plants. Fiat, Ford, Opel, Renault, Hyundai and Toyota all have plants there, some of them joint ventures with local companies.
Iran is a closed economy, and most of its production is sold domestically. Kit production of the Peugeot 206 is starting, and Renault will produce the X90 model there.
Last year, the nation's production of 350,000 vehicles fell short of demand, Armstrong says. Iran has plenty of oil, and high prices have generated some wealth. Armstrong believes car sales will jump from 370,573 last year to more than 500,000 next year, if all goes well. But that's a big "if."
"Iran could be constrained by geopolitical instability because it's designated as part of the axis of evil," Armstrong says. "Unless there's severe disruption, you'll see strong expansion. The demand is there. It's just a question of orchestrating production to supply it."
Japanese brands account for as much as 50 percent of the market, Armstrong says. Toyota leads most segments, including pickups, which are popular in the region.
While high oil prices have boosted revenues, the oil states have been hurt by currency fluctuations. These nations are paid in dollars for their oil, and the dollar has been sliding against the euro and yen. As the dollar slides, buying power declines.
But a weak dollar has not canceled the benefits of high oil revenues.
Says Armstrong: "Those markets have been doing quite well, regardless of the war situation."