Sino-Iranian Auto Ties to Stay on Course

Sino-Iranian Auto Ties  to Stay on Course
Sino-Iranian Auto Ties  to Stay on Course

In recent days, local news agencies have been circulating reports regarding the gradual withdrawal of Chinese automakers from the Iranian market.

These somewhat left-field statements reared their heads following a report by ISNA, which was subsequently picked up by most media outlets.

It seems the earliest talk of the immediate pullout of China could be sourced to a local expert who stated that with the prospects of European companies coming back to Iran, Chinese car companies will ultimately lose out.  

Shahram Azadi, an economist and University of Tehran professor, said, “Some Chinese carmakers whose products are [of] low quality will eventually have to bid farewell to the Iranian market.”

Azadi, like many in Iran, have not been charmed by Chinese cars. Experts sharing the same view, including members of Iran's part makers' guild, recently announced buyers would simply overlook Chinese brands as soon as someone better turned up.

“The screw will grow even tighte on Chinese producers if Europeans manage to supply cheaper and better quality products to the Iranian market ,” he added. 

Based on this premise, if European carmakers match the price-point of Chinese carmakers– a hard task–the latter is expected to pack their bags and concentrate on Southeast Asia.

I think not.

The crux of this story is based on one unsubstantiated comment from a Chery official, with no other source than the ISNA article. In this report, the unnamed Chery official admitted that the company’s share of the Iranian market has declined over the past year.

As the comment was likely taken out of context, one could assume that even if they had sold one less car last year, it could also be interpreted the wrong way.

Nevertheless, one of the likely reasons for Chery's dip in sales could be the increasing competition from other Chinese car companies entering the Iranian market. In the past six months alone, no less than nine new Chinese cars have gone on sale from at least four companies.

  Why the Chinese Will Stay

In addition, China's presence in the local car market is only likely to increase rather than the other way round. This is because of eleventh-hour dealings between Chinese carmakers like Brilliance setting up joint ventures with Saipa.

Chinese cars have also had a bad rap in recent years. A campaign by some local auto part makers has attempted to paint a bad picture of Chinese brands, claiming that they are cheap and dangerous.

Looking at the most common types of car accidents, including driving fatalities, one will discover, in terms of numbers, it is Iranian car owners that are proportionally more at risk due to their vehicles' poor quality.

  China's Growing Int'l Presence

China is also encroaching on the European automakers and markets. Brilliance already assembles and takes design cues from BMW, their partner in China.

Another carmaker, Geely, is growing its range of vehicles after purchasing Sweden's Volvo in 2012 and others are attempting to match mid-size car offerings.

In addition to these points, Peugeot, Iran's most prolific foreign brand, recently signed a multimillion dollar deal to produce Peugeot branded vehicles with Dongfeng Motors.

The presence of Great Wall Motors, another major Chinese brand, has been growing in Iran with the help of local dealers. But, they have not limited themselves to just selling in Iran, they are moving into Central and Eastern Europe too–for the long term.

  Remember South Koreans!

In the late 1990s, South Korean cars had begun to make their way to Europe and the Middle East. At that time, vehicles by Kia and Hyundai were shunned by potential buyers, as they blamed poor quality build and faulty electrical wiring among the quality issues.

Now, Seoul-based manufacturers are leading competitors in terms of safety, quality and style. These benefits are coupled with long-term low-interest offers.

Now that China has a growing auto presence globally, the China auto giants will not be in a hurry to leave a market like Iran, described by one investor as "low hanging fruit".

On the contrary, they are more likely to increase their investment in the market, post-nuclear agreement, as financial transactions will no longer be hindered.

Moreover, the Chinese carmakers, seeing European competition increasing, will start to offer tempting part-exchange deals, as well as finance and lease schemes. They will also fight off emerging market vehicles like KWID that Renault is proposing to bring to the country.

No, Sir! China is not leaving Iran. Those who claim Chinese auto companies' death is imminent are highly delusional and exaggerating, to say the least.