Economy, Auto

Tire Market Prospects

Tire Market ProspectsTire Market Prospects

Iran's tire industry has been one of the few remaining sectors in the wider automotive sector to not fall foul of the stagnancy afflicting car sales.

With this in mind, a national tire producer has recently announced that they are investing in the future of the industry with the inauguration of a new factory in the eastern city of Zabol in Sistan-Baluchestan Province.

Local sources reported on April 6 that Mohammad Reza Nematzadeh, minister of industries, attended the groundbreaking ceremony of Gostaresh Aria Tire’s tire production facility in the Afghanistan-bordering city to great applause by locals, Tyre Press reported.

The new factory, being built within the Ramcharan Industrial Estate, is projected to have an annual production capacity of 50,000 tons of light and heavy tires.

Gostaresh Aria Tire site is said to cover 50 hectares of land, with much needed infrastructure under construction.  Regional IRIB outlet reports that an investment of 6,281 billion rials ($202 million at market exchange rate) has been allocated to the project.

Prior to this groundbreaking ceremony, the Euro Rubber Journal reported that Razi Industrial Group had broken ground on Razi Tire Company in Sanandaj in the western Iranian province of Kurdestan. Nematzadeh also attended this event.

Razi Tire, formerly known as Sabalan Tire, is owned and run by the Ganji brothers, who also run Artawheel Tire in Ardabil province and Yazd Tire in Yazd.

ERJ reported that Razi Industrial Group owns 81% of Razi Tire and the local affiliate of Industrial Development and Renovation Organization owns the rest. Both efforts form part of the Iranian tire industry’s plans to double in size by 2025. Three of the four factory construction projects are being run in partnership with IDRO and private investment.

But, will the tire industry be ready for the expected jump in vehicle ownership across the country in the coming years?

In 2015, backed by Iran Khodro Company, the Iranian government announced that sales inside the Islamic Republic are expected to exceed current estimates with 500,000 vehicles entering the vehicle fleet in the next few years.

Add to this, the growth in second vehicle ownership, and Iran's tire industries may struggle to meet the market demand for tires by the projected 2020 date.

  Estimated Growth

In a report published by Tech Sci called "Iran Tyre Market Forecast & Opportunities, 2020'’, Iran's tire market is forecast to grow at over 12% compound annual growth rate from 2015 to 2020.

But with Iran's aspirations to become a global hub for foreign car production, those numbers may be lower than originally thought. Iran's car producers have stated several times that they plan to export and, with this wild-card scenario in play, the sale of tires produced in the Islamic Republic is expected to skyrocket.

Owing to restrictions on the operations of major international tire brands in Iran, domestic tire brands like Barez, Yazd, Kavir and Goldstone have been dominating the country's tire market over the past many years. However, the industry's growth can only happen if the tire manufacturers manage to sign long-awaited deals with the foreign car companies.

Add to this, the issue of quality of Iranian products requires serious attention, as many manufacturing bases struggling to meet the ever-increasing quality standards.

Some industry insiders have lamented their weak position when it comes to foreign competition, with one parts company owner recently admitting that possible foreign producers may not wish to partner as they can now set up operations independent of the local producers.

Messages like this from the industry have put a dampener on possible joint deals by local parts and tire companies that gravely need foreign investment and technology to compete on a level playing field with international leaders in this industry.