Official Showrooms Spell End for Independent Dealers

Official Showrooms Spell  End for Independent DealersOfficial Showrooms Spell  End for Independent Dealers

Tehran’s Shariati Street has been home to automotive dealers for time immemorial (the street is the oldest north-south road in the capital and referred to by Tehran’s natives as the “Old Road”).

But, recently, there have been a new trend emerging on this historic thoroughfare and it is the disappearance of older independent automotive dealers and the rise of vehicle dealerships.  

On south Shariati Street, in the past six months, three official representatives of international carmakers have invested heavily to bring their brands to the high street. These are Renault, BMW and Toyota, which are serious contenders in the Iranian premium car market.

Directly across the road from the two new showrooms previously stood an independent dealer whose yellow bricked walls were a familiar site, ironically that has now become a new branch of Bank Maskan, according to the new signage above the smudged-out windows.  

BMW Persia, which owns the largest plot on the main road, has invested large sums of money in turning a forecourt into a new double ceiling structure. It will probably be, when finished, the most luxurious car dealership in central Tehran.

Renault and Toyota’s local dealerships, a little further up the road are next to each other, with the IrToya brand just finishing its signage in the past few days. Prior to this, both car showrooms were selling a mix of different vehicles from brands like Lexus, BMW, Ssanyong and Mercedes-Benz.

This way of selling vehicles was up until recently the realm of showrooms across the country while independent dealers, which most people from outside Iran are used to, were a rare sight reserved for a few luxury car brands and Iran’s local producers.

  The Problem

Anybody who bought a car from a non-Iranian carmaker has in the past had had to haggle with small car dealerships with little or no connection the brand they are selling.

To them it is a case-by-case deal: What the consumer gets at the end is at their own risk and the ability to haggle is crucial to get a good deal.

A report by this paper from last December highlights the problem in numbers: Of the 18 so-called “official” representatives of foreign car brands in Iran in 2015, only 30% were authorized dealerships.

An official at the Center for Guilds and Merchants, in that report, noted that of all the imported cars, those produced by South Korea’s Hyundai remain the most popular.

During the first seven months of the previous Iranian year (started March 21, 2015), Hyundai, Kia and Toyota each held 40%, 17% and 16% of the domestic market share respectively.

Other imports during the same period were from Renault (6%), BMW (5%), Chery (4%), SsangYong (3%), Mitsubishi (2%), Mercedes Benz (2%) and MG (2%).

As these car makers aim to grab part of the estimated growth of the vehicle market in the next few years (some estimates put it at 300,000 imports a year by 2025) then they must offer the growing consumer base a significant improvement in their dealerships.

  The Solution

As the growth in official showrooms continues and parent companies and local representatives vie for high street spots, experts have highlighted the benefit of this trend to car buyers, according to Donyaye Khodro.  

Some auto experts argue, according to that report on June 15, that the direct import of cars in post-sanctions era will have a positive effect on decreasing the vehicle’s price.

The added benefit of servicing and real guarantees also swings potential buyers.

However, not everyone agrees this is the main issue at play. Farhad Ehteshamzad, the head of car importers’ association, believes the fluctuation of foreign exchange rates has a more decisive impact on imported car prices and the revenues of the auto brand’s official showrooms.

“The cost of importing vehicles and the growth of banking facilities (i.e. credit) will be the main driver of growth in the next few years as well as the bulk buying availability of larger dealerships,” he said.

Ehteshamzad adds that transport costs and middlemen will be the losers of the change in the sales of cars over the next few years, as is being witnessed now.

Ultimately, their prices will remain higher than the main dealerships and will play into the hands of the big boys.