Over the past three months, reports of foreign carmakers wanting to enter the Iranian market have abounded.
In these articles, we notice the emergence of Chinese brands, the interest of European automakers to reenter Iran and, to a lesser extent, feelers by American car manufacturers to test the Iranian waters, after an absence of some 35 years.
All these articles bode well for the Iranian car buyer, but what does this mean for the current vehicles on the roads? And how can car dealers and the secondhand vehicle market prepare for the onslaught of new vehicles coming to market?
Likely Scenario
As more foreign automakers join the race to woo Iranian car buyers, one thing is apparent: the existing car stock will go through a radical transformation in value and ownership. Up until recently, Iranian consumers have had to buy Iranian cars because they "had no choice", as one established Mercedes-Benz dealer stated.
Iran's auto manufacturing, for a number of reasons, has faced a quality issue in recent years, with many once strong brands also facing a backlash from buyers, as they are sick of the poor quality of vehicles produced in Iran.
With the prospective rise in better options, Iranian buyers are less likely to buy cars designed and developed by Iranian carmakers who also realize this.
IKCO's Samand and Saipa's Pride are likely to see the largest depreciation in value over the next 12 months. The aging Peugeot 405 is also likely to take a significant hit, as buyers find better models.
In the Numbers
Iranian buyers' habits are already beginning to shift from the old bestsellers, with newer models overtaking their counterparts.
Car production in the current Iranian year (started March 21) is up 17% to 161,426 units, including 150,556 sedans and 8,547 pickup trucks. The market leader is Saipa's Tiba, a small sedan and hatchback vehicle locally developed and sold in multiple styles. This is the first time the small hatchback and sedan has taken pole position since its release a couple of years back.
Two explanations for this sudden surge in interest could be explained by fuel consumption habits and changing demographics. The Tiba hybrid has geared up dramatically at 21,623 units this month against 12,647 for the gasoline variant, and the coming of age of the hatchback variant launched a few months ago also points toward a younger group of buyers, who are also image conscious.
Saipa has announced its plan to replace its top-seller Pride with Tiba and is actually restructuring its plants to implement this, according to the BSCB blog.
The IVMA production numbers point to a shift in consumer allegiance. With Saipa's change in tactic over the past two years, which targeted the middle class, they have managed to bite off a chunk from Iran Khodro's vehicle sales.
What does this means for IKCO's output? It totaled 13,596 units for the month versus 49,075 units for Saipa. Runna is down 13% while Dena is gearing up at 2,484 units.
The Knock-On Effect
Both manufacturers are going to have their work cut out for them as more competitors join the fold and the secondhand vehicle market finally sees a reduction in unit prices.
The secondhand car market currently remains vibrant. There are no figures on the private sales of cars, but vehicles over 10 years of age are becoming increasingly difficult to sell. From observations through vehicle websites like Bama.ir, the number of older IKCO models continues to increase daily with people opting for newer vehicles.
This is a positive sign as the desperation of car buyers "buying anything that moves" gets replaced by a steady secondhand market. The knock-on effect to third-hand and fourth-hand buyers is that they are now buying a younger stock of cars.
The upsides for the consumers are higher spending power and wider choice. The market will see an increase in new vehicles, which will also help move some of the old vehicles off the road.
Obviously, not everyone will win though. The downside of this shift in prices could mean that many people, who have held on to their vehicles as an alternative asset investment, are going to suffer from the devaluation of their vehicle.
