Chinese Cars Here to Stay

Chinese Cars Here to StayChinese Cars Here to Stay

Talks about Chinese auto companies' impending demise in the Iranian market have been greatly exaggerated, no matter how many times people say they will pack their bags and go when European companies enter.

The detractors have been proven wrong, time and again.

Several auto producers and assemblers in the country have said over the last month that they are bringing to market a handful of Chinese models. For example, Iran Khodro, the top auto producer in the country, has already admitted it cannot develop new car platforms on its own and has begun offering the Changan C30 crossover and the Haima S7 large SUV.

SAIPA, the second largest domestic car producer, has been offering Chinese models for over 12 months, with the Brilliance models priced only a little more expensive than locally engineered vehicles.

Other car manufacturers have not been left in the dust either; several other companies have signed joint ventures with Chinese producers, because ultimately in terms of price, European cars are too expensive for the vast majority of the Iranian car buying public.

  Accepting Reality

Car analysts for the past year have been dismissing the idea of Chinese automakers surviving the onslaught of new, reasonably-priced European cars, but looking at the trickle from the Green Continent so far, this seems highly unlikely.

Renault has struggled to offer new cars matching the price range of Chinese vehicles, even though the latter has had import taxes imposed on their parts.

The French company has so far offered only Sandero costing over 400 million rials and offering not much in the way of space compared with Brilliance.

PSA Groupe (Peugeot Citroen), on the other hand, after teaming up with Dongfeng Fengsheng in China, has realized this fact. And, that is why the C30 Cross, which is based on the C-Elysee platform has been offered by Iran Khodro at a reasonable price.

The price of this vehicle is believed to be just over 400 million rials (according to an Iran Khodro representative). It's priced on a par with Sandero, but you will get a much bigger car space for the same price.  

Ultimately, the final price may go higher, as adverts for the C30 Cross do not state the exact price. But if it does not top 500 million rials, that vehicle can be a game-changer.

Last year, a report by Business Monitor International reflected the changing environment in the Iranian auto industry and the rise of Chinese cars in the domestic market.

Further down the top 10 chart is the increasing market share grabbed by the two Korean carmakers Hyundai and Kia, apart from the Chinese carmakers Chery, Geely and Lifan. In fourth place was France's Renault with 7.5% market share, according to the report.

  Production Status

Iranian vehicle production rose by 67.5% in 2014 to 1.09 million units, according to statistics from the International Organization of Motor Vehicle Manufacturers (OICA).

Breaking down the figure, Iran produced 925,975 passenger cars and 164,871 commercial vehicles. This makes Iran the 18th largest auto producer in the world, BMI said.

With about 48,600 cars assembled last year through June, Chinese cars accounted for 9.75% of Iran’s total car output, a sixfold increase from just 1.6% in 2011.

While Iranians welcome Chinese products because of their relatively lower price, American carmakers are vying for a share of the huge Chinese car market.

The New York Times notes that China, despite concerns about its economy, is generating significant returns. Ford was once a laggard there, but it has built a series of plants and is now building up on its Chinese market share. Its share of profits from Chinese joint ventures in the first quarter was $443 million—$83 million more than a year ago.

If China is the biggest car market in the world by the end of the decade, then it only makes sense that European and American car producers are going to focus on the Chinese buyer.

Unfortunately, Iranian car buyers have always been an afterthought, as the import of American cars into Iran faces political sensitivities and heavy import duties reduce help sustain the monopoly of domestic car produces.