In Baghdad, taking the wheel

With violence reduced drastically, new cars have become the latest must-have for those who can afford it, as they get rid of clunkers they had stuck with to avoid kidnappings. By Kimi Yoshino and Caesar Ahmed January 15, 2009 Reporting from Baghdad — Customers circle the Hyundai showroom like a pack of hungry wolves. Most are waiting for the next delivery of cars to roll up to the lot. The others are kicking the tires and peering into windows, armed with a wad of cash and prepared to pay in full. No deal-making will be necessary. These cars practically sell themselves. The happy daydreams of an idle car salesman? Not in Baghdad. "I can't keep up with it," said Seyamend Mahmoud, sales manager at one of two Baghdad car dealerships. "If I bring 50 cars, in one day, I will sell them. If I bring 100, I will sell them in two days. . . . Even the luxurious, expensive cars are easily sold in here." Although American car sales have fallen off a cliff, pent-up demand for new cars in Iraq is fueling a car-buying boom the likes of which haven't been seen in decades. After Iraq invaded Kuwait in 1990, the United Nations imposed an embargo that prevented the import of most nonessential consumer goods. Although some merchants began importing cars in 2003 after the ouster of Saddam Hussein's regime, most drivers stuck with their clunkers, fearful that a new car would make them easy targets for kidnapping or theft. But now, as security improves and residents travel more freely around Baghdad, new cars are the latest must-have accessory for the well-to-do. Tiny car lots -- dozens of them -- are cropping up in every neighborhood of the capital, offering all types of vehicles, including shiny red Humvees, silver Chevy Suburbans, and new ambulances and minibuses. And for the first time, the city boasts two authorized dealerships, Hyundai and Renault. These dealerships offer factory warranties, something no other car lot can match. The Al-Kasid Commercial Agencies Co., responsible for the two businesses, has also opened its own service center, where mechanics are trained to repair Hyundais and Renaults. The warranties are tailored for Iraq's harsh summers, with special protection for air conditioning and cooling systems. Mahmoud's boss, Ali Makkiyah, said negotiations were underway for the company to open a third dealership. Customer demand, he said, is there. For his Renault showroom, which opened in December, Makkiyah placed an order for 400 cars, which he expects to sell within a matter of months. It's a huge turnaround from 2006 and 2007, when the company sold no cars to individual buyers and only a few to the government. Now, the Hyundai dealership alone sells about 150 cars a month. That number would increase if Makkiyah could keep the cars in stock -- and if he accepted installment payments. But in Iraq, most consumers shun bank loans and most merchants will accept payment only in cash, in full, making the flurry of car sales even more surprising. Most of the buyers are businessmen who have made quick money on government contracts or import-export deals. The wealthiest in Iraq earn $30,000 a year or significantly more, but government employees are more likely to make only $7,000 to $12,000. On a recent afternoon, Hewa Mohammed Ahmed, 31, waited to complete his final contract for a new Hyundai Tucson SUV. "I bought it today," he said, smiling. It's the first new car the government worker has owned. "I picked a new car, a brand-new car, with no mechanical problems. It's nothing like you get in the streets." Ahmed said he has been saving for a new car and believes it will be a good investment because he will no longer have to pay taxi fares to get to his job in the Green Zone. Yaser Sumrai came to the showroom with his wife, and a little while later the journalist for an Iraqi TV station walked away the proud owner of a Hyundai Santa Fe that he bought for $25,700. "Security is a lot better," he said. "There's no more danger in driving a new car on the streets of Baghdad. . . . But I hope other companies also open so we can have companies and the customers will have better choices and prices." Away from the authorized dealerships, new car prices can be inflated to meet demand. One merchant displayed a fully loaded 2009 Ford Flex in his small lot. He planned to sell it for $60,000, almost double what it would cost in the States. These lot owners buy from dealers in Kuwait and Jordan, then ship the cars into Iraq. These businessmen are well aware of the international financial crisis and the economic woes facing American car manufacturers. Even in Baghdad, U.S. companies may have their work cut out for them, lot owner Imad Abed said. The perception among Iraqis, who like their cars white because it keeps drivers cooler, is that the air conditioning in American cars is not as reliable as in Japanese cars. "About 60% buy Japanese, and the other 40% are for American and German cars," Abed said. "You have to convince people that American cars are more solid. "But still, if an American company comes over here and sells, they will do very well, especially if they give a warranty and a mechanic." And unlike in the U.S., where manufacturers are slashing prices and offering incentives, businessmen such as Mustafa Mohammed, owner of the Al-Kather lot, can stick to a pretty tough set of rules. "We don't need to do any advertising," Mohammed said. "And there's no such thing as a guarantee. You have to pay the whole amount, no installments. Only if he's my friend will I let him." Customers in Baghdad don't even get to test-drive their cars. "After you buy your car, you can go for a test drive," Mohammed said, adding that security is good, but not that good.