TBY talks to Stephan Haji Touma, Chairman of Gargour Holding (Mercedes-Benz), on trends in the market, the premium car sector, and the short-term outlook.

Stephan Haji Touma

What have been the highlights for Gargour Holding over the past year?

We are trying to maintain our solid position while still investing in the company's growth, despite the turbulent situation in the Levant that has led to economic slowdown. We are building our group for the future. We are determined not to stagnate so as not to fall behind when the situation improves in the coming years. We are finalizing and opening a new showroom in Beirut during 2013 in addition to the expansion of our network throughout Lebanon. We are following the same network expansion in Jordan. For Syria, we have finalized our investments and we hope that the crisis will come to an end soon in order to explore opportunities there. In addition, the group is looking into opportunities in the Levant to also expand in terms of brand representation.

What trends can you identify in the Lebanese demand for cars?

Some years ago, the luxury market was driven mainly by medium to large cars, while the low-budget car segments were mainly dominated by used cars imported from the EU, and later from the US. Total used-car sales were double the volume of new cars purchased. Over the past two years, the used market has dropped to be replaced by new Korean cars. On the other hand, the fashion trend in the luxury market was moving toward smaller, yet sporty and dynamic cars. The younger generation is tending to move toward compact cars and that is why Mercedes-Benz is expanding its product portfolio in favor of smaller and more dynamic cars, such as the A-Class and CLA.

How would you compare the premium car sector in Lebanon with other countries in the region?

We cannot compare Lebanon with the Gulf countries, such as Saudi Arabia or the UAE, for two reasons. Firstly, in Lebanon, we have a customs duty that is quite high in addition to VAT. Secondly, the GDP per capita is much lower than the GCC. Nevertheless, Lebanese people like to own the latest models as part of their lifestyle and image. In addition, owning a car is considered as the second investment after a house. The increase in real estate prices has positively affected the sales of luxury cars, which are considered relatively affordable when compared to property. Many of the landlords are wealthy and can afford to make any purchase at any price. Even in New York, few have this kind of cash. Also, there are no taxes on property, so it is almost a tax-free heaven here, except for indirect taxes, such as customs duties on cars and electricity.

In terms of sales, which model is in the greatest demand?

The most popular models are from the E and C-Classes. Then, we also have our SUV, mainly M-Class and the iconic G -Class, which is sold out. Of course, we also have the S-Class and have recently introduced the A-Class. It is a new concept small car, and will be a perfect fit for the Lebanese market. The AMG version of the A-Class can be sold to the young owner of a Porsche, because the car comes with a very powerful engine. Mercedes is producing a new line that will extend the age range of its customers. At first, there was too much focus on the middle- to high-price ranges, or on certain age groups, but now the brand is increasingly targeting the youth.

In terms of the other markets that you cover, which ones are performing best?

Jordan is still doing well, despite the turbulence in the Levant. We had enjoyed a strong presence in Syria, but we have been out of activity there for the past couple of years. At the moment, we are developing a project that will not be ready for another year or two. We are looking into the feasibility of constructing an assembly plant in the area for commercial vehicle production.

What is your short-term outlook for the premium sector in Lebanon?

The premium sector will always be good. I say “always" because, unfortunately, if a customer is in a bad financial situation, their car will be linked to it. The car is a part of their status. Therefore, they will try to maintain the type of car or brand that they are driving. It becomes a question of habit. It is like when you live in a 150-sqm apartment and then you move to a small 75-sqm one; it can take its toll mentally. In addition, around three times the current population of Lebanon have left to work abroad, which creates a major pillar for the Lebanese economy. These immigrants still inject cash into the country and invest further. For instance, the launch of the new Mercedes-Benz S-Class took place in mid-2013, when the showroom is ready. All vehicles are already sold out until the end of the year. We do not have enough cars to sell even though they are worth over $200,000.

What would you like to add in regard to the automotive sector?

The taxis in Lebanon urgently need to be changed; they are terrible. Everywhere else in the world, taxis are clean and neat, but here you see old, dirty, and unregulated vehicles. The taxi fleet in Lebanon is at around 5,000-6,000 vehicles, and with 7,000-8,000 new cars we could project a better image. We have requested the government to introduce an incentive scheme to facilitate this transition where buyers would not pay customs tax or VAT. We also propose a stipulation taxis be changed every five years, to maintain a new fleet. They have done this in Brazil, and now in São Paulo there are something like 25,000 new cars—all white, all beautiful, and everywhere. Lebanon would benefit from this.