Gas-guzzling sport utility vehicles may be falling out of favour in North America. But Russia’s hunger for them will help power General Motors Corp. and other automakers to a dramatic sales gain here this year in what business leaders say is easily one of the world’s most profitable places to do business.

GM sells eight SUVs in Russia, including the Hummer, Trailblazer, Cadillac Escalade and the popular Chevrolet 4X4 Niva model, produced with local joint-venture partner OAO Avtovaz. And while Americans move slowly towards smaller vehicles as gas prices hover near US$3-a-gallon, Russians, bolstered by their newfound wealth after the end of Communism, want their ride super-sized.

Warren Browne, GM’s top executive in Russia, calls it the “Can you make it any bigger?” trend. He said it’s being fuelled by the country’s sometimes sketchy road conditions, abundant snow, and growing wealth. Personal disposable income will more than double in Russia between 2005 and 2010, according to some estimates, making it Europe’s second-largest auto market by early next decade and surpassing France, Italy and the U.K.

“The market has really, on a quarterly basis, just gone kind of crazy,” Mr. Browne said during an interview in Moscow yesterday. “It’s been positively surprising … We offer more SUVs than most companies offer cars.”

GM sold 132,000 vehicles in Russia last year. It predicts it will nearly double that to 257,600 units this year, boosting its market share from 6.5% to 9.9%. GM, one of the first automakers to set up in Russia, is also seeing surprising strength from its European Opel brand, Mr. Browne said.

As a whole, automakers operating in Russia will boost sales from 1.65 million in 2006 to 2.6 million this year, according to an industry forecast.

Canadian auto supplier Magna International Inc., which inked a deal with Russian billionaire Oleg Deripaska this year to expand in the Russian market, cites the country’s growing middle class and rising average price per car among the key reasons why it is betting big on the former Soviet Union. Auto-makers and suppliers alike make profits thousands of dollars higher on bigger SUVs and their waning popularity in North America has hurt their bottom line.

Magna has told investors it believes it can generate revenue of as much as US$1,100 per vehicle from its metalforming parts alone in the Russian market, and hundreds of dollars more per vehicle in other business lines like seating and transmissions.

While the salaries of ordinary Russians lag far behind those in the West, a flat personal income tax rate of 13% and the remnants of the Soviet system, such as subsidized housing and utilitites, means many Russians have more disposable income than Westerners, Scotiabank Group said in a recent report. As a result, there is a growing middle class, particularly in St. Petersburg and Moscow, where some 20 million live.

“Russians don’t save money. They spend because they’re flourishing in their new-found freedom,” said Andrew Somers, president of the American Chamber of Commerce in Russia. All retail sectors in the country, from groceries to electronics, will grow significantly in coming years, consultancy PMR Publications said in a report, as the value of retail goods tops 10.9 trillion rubles in 2007.

Mr. Somers said he’s seen a growing number of companies, such as Wrigley and Philips, bring their entire board of directors on trips to Russia to convince them of the profits to be made. “Russia has such a bad image abroad that if you haven’t come to Russia, you can’t possibly comprehend the opportunities.”