Iran’s Car Industry…And Opportunity

Via The Economist, an interesting look at Iran’s automobile potential in light of the easing of sanctions:


TEHRAN’S clogged streets hint at one industry poised to profit from the lifting of some sanctions on Iran after a deal to curb its nuclear programme. Foreign manufacturers are set for a race into Iran to take advantage of a car-hungry population of nearly 80m. Its huge domestic market is the largest in the Middle East after Egypt’s.

The timing of Iran’s re-opening is a boon for the world’s big carmakers. Sales in America are at or near a peak and Europe’s rapid rebound may be coming to an end. Meanwhile big emerging markets such as China and Brazil are slumping. Sanctions hit Iran hard. Vehicle sales, which hit a peak of 1.6m in 2011, halved by 2013 as sanctions tightened. Then, as relations thawed, the market grew steadily again. It should surpass 1.3m vehicles this year before bouncing back to 1.6m by 2016, according to IHS, a consulting firm.

French carmakers, once the market leaders in Iran, are seeking to re-establish their grip. PSA Peugeot Citroën, which alone accounted for around a third of sales in 2011, and Renault are well-placed, given their pre-sanctions presence, to join forces with the domestic carmakers that now account for most sales. Indeed Peugeot has agreed to restart production with Iran Khodro, its former partner. Renault is discussing buying a minority stake or factories from Pars Khodro, another local firm. French government ministers, never shy to press the case of domestic firms abroad, have rushed to Tehran to smooth the way.

They will have their work cut out. The Iranian government is displeased with France’s hardline stance over the nuclear deal. Peugeot’s rapid exit from the country in 2012, after joining an alliance with General Motors, still rankles. That could leave the door ajar for Chinese carmakers, which have set up a network of importers despite the sanctions. But Chinese models have a well-earned reputation for poor quality.

Competition from other carmakers will be intense, too. Iran is an inviting country—and not just for sales. European firms in search of low-cost production invested first in Spain, then Eastern Europe and have now turned to north Africa. Peugeot has a new plant in Morocco, Renault has set up in Algeria. It will take a while but Iran, a promising market in a fast-growing region, could be next.

This entry was posted on Wednesday, August 19th, 2015 at 8:03 pm and is filed under Iran.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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