German automaker Borgward says it is entering Iran with hope and caution.
Speaking to the Financial Tribune, the company’s senior vice president for global marketing, Tom Anliker said, “Initially, completely built units will be imported into Iran” and if all goes well the company will set up assembly lines in the country.
Borgward made its debut at the Tehran Auto Show on Nov. 26 with two SUVs, the BX7 and the BX5. The cars will be imported in collaboration with a local company Kian Motor Varna.
In response to a question why Borgward waited so long to make an entry into Iran and why the company is circumspect, Anliker said, “You have to I see this differently. Normally, companies come and start production and then see whether they can sell cars in Iran. I want to do this differently. First I want to see whether I can sell cars and then launch production.”
Elaborating the point, he says, “Borgward is entering Iran with a controlled risk strategy starting with CBU imports and then moving to local assembly.”
Earlier the carmaker displayed its new models at Dubai International Motor Show (Nov. 14-18). Anliker says, “Borgward wants to sell cars in all top-end markets in the region.”
The company’s roots go far back to 1924 when Carl F. W. Borgward, an engineer, designed and built a motorized carrier cycle called Blitzkarren. By the 1950s, it was the third-largest carmaker in Germany and accounted for 60% of the country’s auto exports.
Its best-known model, the Isabella, was born in 1954. Borgward saw its last Isabella coupe roll off the production line in 1961. But with the help of state-owned Chinese truck maker Beiqi Foton, the brand was revived in 2008 by the founder’s grandson.
Localization
One of the oft-mentioned mantras of Iran’s Ministry of Industries has been “localization in production deals with foreign carmakers”. According to the ministry, at least 20% of the parts used in vehicles produced/assembled on foreign lines in Iran should be locally made. Should they fail to comply, their products will be considered as imported CBUs that will have a different and much higher tariff and tax bracket.
Tariffs on imported auto parts are between 15 to 20% but for bringing vehicles into Iran the cost is over and above 100%.
Anliker said, “I visited Iran last year and studied the supply chain. Working with Iranian parts makers will not be a big issue. We will find the right kind of suppliers to produce for us the components needed to meet the 20% local content.”
Anliker did not say how much Borgward would invest in Iran. Regarding the possible risk of new US sanctions, the German said, “It is a rather speculative question which cannot be answered. Nothing has happened yet.”
Market Upheaval
When asked how many Borgward cars Kian Motor can be expected to sell in Iran, the company director, Ali Mehrian, said, “Iran’s auto market is in disarray.”
Trying to figure out what is going in the chaotic imported car market, he says, “Forex rates are rising. The government wants to introduce new auto import rules. This has created some profound uncertainty. No one has a clear vision about the future market. None of the importers can really say how many cars they will sell next month.”
Similar to other market observers and business insiders, Mehrian is of the opinion that the government is trying to limit car imports.
Mehrian further said, “Kian Motor is trying to launch local assembly as soon as possible.” On a optimistic note, he adds, “Borgward’s local assembly plant will be launched before March 2019.” A tall order, to say the least.
The two models Borgward introduced in Iran, namely the BX5 and BX7, share the same architecture and the same 2.0-liter four-cylinder engines. The BX5 is slightly smaller than BX7. Torque is distributed by a seven-speed dual clutch transmission. The vehicles could be priced at about 2.5 billion rials ($61,000).
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