Automotive parts and production industry in Iran is slumbering right now, while the domestic tire market continues to be one of the areas of potential foreign direct investment and heightened interest from international multinational corporations.
With that in mind, a new report has given the tire market forecasts and opportunities in the months ahead up to 2020.
The report by the Dublin-based Research & Markets notes current sales statistics, as well as current sales patterns dating back to 2014, or just after the election of President Hassan Rouhani.
The report notes that replacement tire market accounted for around two-thirds of the segment's share in 2014. However, an expected increase in automobile production during the forecast period is expected to increase the share of original equipment manufacturers in the tire segment during 2015-20, the company reports.
Over the past few years, various international tire brands like Bridgestone, Continental, Michelin and others restricted their operations in the country due to the sanctions imposed on Iran.
Consequently, this helped indigenous partners to grow their own market share using the foreign technology left behind by the international operators.
These include companies like Barez Tire, Kavir Tire and Yazd Tire Company. The latter being one of the most recognized brands due to its time in the marketplace.
The report notes that the potential easing of sanctions by January, including financial sanctions on trade between Iran and abroad, increases the likelihood of foreign reentry to the local market. This in turn would reduce the dominance of the domestic tire market in Iran and their growing regional dominance.
Iranian consumers for tires—like those abroad—welcome foreign brands like Michelin as they are seen as higher quality tires than locally produced ones.
Iran has the largest automotive industry among the Middle Eastern countries. However, on account of sanctions imposed on Iran by P5+1 states (China, France, Russia, the UK and the US plus Germany), automobile production and sales witnessed a decline during 2010-15, according to the report.
However, after protracted negotiations between Iran and P5+1, a Joint Comprehensive Plan of Action was signed by both the sides in Austria on 14th July, 2015.
This move is expected to stimulate economic activity in the country over the next five years, which would boost growth prospects for the automobile and tire industries in Iran. How foreign companies may reenter the market is currently unknown, but mergers and acquisitions may be the immediate course of action.
An anticipated revival in the automobile industry is expected to drive OEM and replacement tire demand, which is expected to translate into double digit growth of the country's tire industry during the forecast period.
Previous reports by other research organizations back up this prediction, as demand will remain strong for replacement tires.
Government and police campaigns on safer driving, including more frequent changing of tires and spot checks, will also likely drive growth in the tire industry.
