VW Seeking Reentry in Iranian Market

VW Seeking Reentry  in Iranian MarketVW Seeking Reentry  in Iranian Market

Germany's Volkswagen will be allowed to set up operations in Iran as long as it meets strict new requirements, Iran's Minister of Roads and Urban Development Abbas Akhoundi said in a meeting with the board of directors of VW.

"If Volkswagen brings the knowhow and platforms of cars that are in high demand to Iran, the company will be permitted to manufacture here," he said.

According to the ministry's press release, the delegation headed by VW Chairman Herbert Diess met with Akhoundi who was pitching in for Industries, Mining and Trade Minister Mohammad Reza Nematzadeh.

By law, the Ministry of Roads and Urban Development is not entitled to set automotive policies or sign such deals.

At the meeting, Akhoundi said several European auto firms are vying to gain a foothold in Iran.

"VW is welcome to set up a central representation in Tehran and attend to the automotive needs of the country," he said.

The minister added that the company has the option of setting up a services and logistics center in free trade zones that will be established near Imam Khomeini International Airport, south of Tehran.

"Setting up business in this area is to the benefit of VW," he said, noting that the export and import of goods to and from this area will be exempted from taxes.

Highlighting the Iranian public needs in the area of transportation, Akhoundi said the country's public transportation fleet must be renewed with 39,000 buses, 38,000 mini buses and 23,000 taxis.

He added that currently 65,000 dilapidated heavy-duty trucks are plying on Iranian roads, all of which must be replaced.

"We are hopeful that VW will assist the ministry in making these replacements," he said.

The minister pointed to the successful experience of Sweden's Scania in renewing Iranian coaches. "The same model can be repeated with heavy-duty trucks in collaboration with VW," he said.

Akhoundi further said VW will be able to export to neighboring countries, including Pakistan, Afghanistan and Iraq as well as Persian Gulf littoral and Central Asian states.

"We have FTZs in most of the areas mentioned. VW will have the option to set up factories in those regions," he said.

The official noted that there are several reliable leasing companies active in Iran to ease the sales of VW products in Iran.

Pointing to the activities of Iran's top carmakers, Iran Khodro and SAIPA, the minister said several European, South Korean and Japanese auto firms have been working in Iran and collaborating with the Iranian counterparts.

"There are two options ahead of VW: either to work with the Iranian companies or begin operating independently here as the third major automaker in the country," he said.      

VW board members noted that the company is prepared to bring the latest technologies and set up a factory in Iran, as soon as new contracts are signed.

Previously, Volkswagen produced a limited edition of Golf in Iran named Gol (meaning "flower" in Persian), a Brazilian-originated model for emerging markets in a joint contract with Kerman Khodro's subsidiary Bam Company in Arg e-Jadid Special Economic Zone near the southern city of Bam.

All parts in the Gol's CKD kits were sent from Brazil. The body was supplied from the Taubate plant while the engine and transmission came from the Sao Bernardo do Campo plant. Others parts were also supplied by Brazilian manufacturers.

Volkswagen of Brazil also installed the assembly line, according to Just Auto at the time.

Originally, the company said it would import 20,000 CKD units every year. However, due to increasing sanctions on the country, the last models were produced in 2011, according to listings.