Preparing International Automakers for Iranian Market

Preparing  International Automakers for Iranian MarketPreparing  International Automakers for Iranian Market

Germany-based risk consultancy Roland Berger has given its take into the opportunities Iran has to offer for the international automotive industry players.

The recent research report titled "Iran: A Historic Opportunity for Automotive OEMs" notes several points on the preferences of the Iranian automotive buyers and market potentials. In addition, the report outlines trends that are likely to open up for the foreign automotive players.

According to the RB report, the Iranian middle class has grown substantially in recent decades and comprises about 30% of the population.

This group, as the report notes, is the main target of international premium automotive players. The combination of a preference for imported vehicles and the ability to purchase luxury cars will, according to the report, ensure that the premium segment will grow to 66% by 2020.

The absolute number of sales in this scenario increases from 7,000 in 2015 to 90,000 premium cars in 2020. But even in the baseline scenario, the market is showing strong growth and is expected to reach 50,000 vehicles by 2020. Philip Grosse Kleimann, partner at Roland Berger and co-author of the report, said now is the time for global automotive players to leave their mark on the Iranian market. He speaks of a "historic opportunity."

But despite the favorable market profile, there are a number of factors major manufacturers should consider when they want to sell their cars in the Iranian market.

"Economic success in Iran is not obvious," says Grosse Kleimann. "The aftermath of sanctions still leaves its mark on the national budget and spending power, while the current low oil price reduces the income of the government to invest in several industries".

The co-author believes Iran has an extremely complicated tax system with a high degree of government regulation that also hampers the entry of foreign automakers.

"Western companies are faced with a 5,000-year-old culture that is largely unknown outside Iran," he said.

According to the report, in order to successfully utilize the market advantage, foreign companies will have to do their homework thoroughly and create opportunities in Iran.

Preparations should be made for becoming familiar with the complex customs, tax laws and new emission rules.

Manufacturers have to choose between local production and imports, and decide how they want to work with local players. Knowledge of competitors and customer needs are crucial, but a great measure of success in the Iranian market will depend on the ability to build ties with local institutions and authorities.