Opel's Hesitation

Opel's HesitationOpel's Hesitation

Opel, General Motor's European arm, has recently been given a new license to have its cars imported by the Iranian government.

Although not a direct deal with the German-based subsidiary, the news is a positive turn for the country as it now has another European Union-based manufacturer joining the already swelling ranks of foreign producers selling finished cars here.  In the announcement by Iran's Ministry of Industries, Mining and Trade, an approval was granted for Opel's reentry into the domestic market.

According to a press release from the Trade Promotion Organization of Iran, the cars licensed for the local market include the relatively new Opel Adam and the slightly larger Opel Corsa, both of which have small 1600 cc engines at the very most, Mehr News Agency reported.

Tavan Khodro, a local agent, has been given the rights to sell the car in the local market. According to the report, it possesses all the credible certification as well as licenses from Iran's Department of Environment and the Institute of Standards and Industrial Research of Iran.

  Market History

Opel's history in the market is relatively brief. There have been brief stints at people bringing in the vehicles over the years, though a majority of them were imported during the early 1990s finishing, according to Bama, in 1997.

The brand, during the 1990s, imported a limited number of Corsa, Astra and Vectra with a couple of Opel Omega to add to the mix.

The peak for this brand it seems was 1994, with many cars still reaching high prices even to this day.

Accordingly, a 1994 Astra 1.6 with 136,000 km under its belt is tagged at around 149 million rials ($4,000). The second most popular car imported, in terms of number, is the Corsa; one example of this car is a 1994 vehicle with 280,000 km on dash available for 80 million rials ($1,700). The next bestseller was the larger Opel Vectra (Vauxhall Cavalier to Brits), a decently maintained 1995 burgundy version of which with 195,000 km was priced at 200 million rials ($4,200).

 In far fewer numbers was the now-defunct Opel Omega, this executive-level car still earns a breathtaking amount of money inside the country, with one well-kept example costing 430 million rials ($9,000). In what may seem as a dream to station wagon lovers, there is a couple of Astras with the extra long back for sale too, and they cost more than the hatchback and sedan variants.

The auto-selling website also has some newer examples. In the past two years, a limited number of new Opel Corsas and Astras have made their way to the market and much like their 90s predecessors their prices remain stubbornly out of reach for most buyers.

A 2014 Opel Corsa, with one previous owner can be had for as a little as 750 million rials ($15,000). The Opel Astra, however, on the secondhand market are fetching 1.5 billion rials ($32,800).

So, the old and new markets are a price barrier for the brand to make any real impact in terms of sales, and it is likely to remain a small player in the broader market.

Parts are also a major issue when it comes to owning an Opel in the local market. One local Opel enthusiast, Amin Mozaffari who works as a Russian translator, said: "I love Opel vehicles but the main issue I have is with finding spare parts for the cars; parts and lack of servicing centers for the vehicle are major issues with the brand in Iran."

  False Promise of Quality

Opel has always had a small but strong following in the Iranian market like previously explained and many users say the cars are made from high-quality European parts.

In February, Britain's Daily Mail reported one Zafira model randomly setting alight while it was running.

Owner Michelle Merchant said, "I noticed a funny smell coming from the vents and then there was smoke. I remember seeing flames in the passenger footwell first, then it literally went up. I was lucky I hadn’t made it onto a busier road because it would have been fatal."

Vauxhall, the British name for the Opel vehicles, had to recall 220,000 vehicles and issued a formal apology to the family and offered compensation.

However, considering the acknowledgement of technical issues, like breakout of fire, the company remains relatively popular in some European markets.

In Scotland, the new Corsa remains the most popular car in terms of sales and registered 2,575 car sales this March. Overall, the GM-owned company retained its pole position in that market.

  Tavan Khodro's Offering

Tavan Khodro is a small player in the wider market and as one can see from the secondhand market, sales are burdened by a 100% import tax and remain sluggish.

The company's website offers several Opel models, including the large sedan Insignia and Mokka crossover (both currently not available in the market), as well as the newly announced models.

The company has not stated how much the Corsas and Adams will cost in the local market and apparently does not have the Opel Adam in stock, as the company's social media account on Instagram has not shown any on the streets of the Iranian capital.

When Financial Tribune contacted Opel's media relations team on their links with Tavan Khodro, Johan Willem, Opel's vice president for communications, emailed the following response from Russelsheim, Germany: "Neither Tavan Khodro nor any other entity is authorized to represent Opel in Iran.  We understand that U.S. sanctions continue to place significant limits on our ability to do business with Iran, and Opel is committed to complying with those restrictions.  Opel has no plans to enter the Iranian market at this time."

Apparently, it is wary of conducting new business in Iran, as it fears falling foul of the US sanctions laws that penalized banks in the past and remain in place.

What does this mean for the brand in Iran? Opel's limited exposure in the Iranian market like their 1990s jaunt will probably continue to prevail, unless the US equation with Iran changes and it finds the situation assuring enough to find a local partner to enter the Islamic Republic in full confidence.