Economy, Business And Markets

Foreign Partnerships to Boost Iran’s Commercial Vehicle Market

Foreign Partnerships to Boost Iran’s Commercial Vehicle MarketForeign Partnerships to Boost Iran’s Commercial Vehicle Market

The lifting of sanctions has breathed life into the commercial vehicle market, with French and German original equipment manufacturers already in talks with local manufacturers to begin the process of market reentry.

This was stated in a new analysis titled “Strategic Overview of the Commercial Vehicle Market in Iran” from California-based consulting firm Frost & Sullivan, Trade Arabia reported.

According to the analysis, the commercial vehicle market is expected to grow to 320,148 units in 2022 from 160,107 units in 2015, at a compound annual growth rate of 10.4%.

The bus segment is likely to grow the fastest, at a CAGR of 34.9%. Furthermore, production capacity utilization in the medium and heavy duty truck segment is anticipated to increase from 10-15% in 2015 to 60-65% by 2022, it added.

According to the report, the market had been stagnant, as both external and internal factors had crippled economic growth and trade. Besides, vehicle buyers have been deferring purchases until western OEMs return to the market.

However, the market is highly regulated and foreign companies can enter the market only through joint ventures with domestic participants.

“The dominance of local participants and high import duty on completely built units encourage local production and assembling, thereby reducing reliance on imports,” said Frost & Sullivan intelligent mobility research analyst Marshall Martin.

“Iran has regional access to 15 countries and strategically placed free trade zones for exporting, making it an extremely attractive investment destination for commercial vehicles,” he said.

While the vehicles have marginally bigger and more powerful engines, they need superior comfort and safety features. Foreign OEMs will look to make the most of this market requirement by establishing common platforms between different regions and save costs and time in developing region-specific products.

The Iranian market is currently beset by a shortage in cargo and construction projects, leading to reduced demand for trucks. This market situation affects fleet owners’ and drivers’ ability to pay their installments. Some small companies even resort to smuggling vehicles into the country, making the market uncompetitive.

Martin noted that in due course, the entry of Chinese and Russian OEMs will compel western OEMs to reduce prices to regain market share.

“Convergence by both budget and premium manufacturers towards a common price range of $55,000 to $75,000 will enhance the competitiveness of the market,” he added.

Overall, because of its huge untapped potential, Iran will continue to be the leading market for commercial vehicles in the Middle East. The market will be even more competitive by 2022, driven by the rising demand for quality and reliability.