Iranian car market – a new opportunity?

Due to the ongoing conflict between Russia and Ukraine, many companies are leaving the Russian market. Not surprisingly the Ukrainian market is currently zero. Thus, the automotive market risks missing sales of about 1 million cars. However, no one likes to reduce production & sales plans and profit forecasts. So we need to look for new markets. But…

Where to switch to?

The Iranian car market is the largest in the Middle East. The country has been under sanctions for many decades. European countries have long wanted to lift the embargo one way or another, and in the current situation, we are seeing a softening of rhetoric and even the first hints of potential negotiations on the part of the United States. After lifting the embargo, the Iranian market will become one of the fastest-growing markets in the world, with the potential to double sales in just a couple of years. We have already seen this twice when the Iran embargo was at least partially lifted. This applies both to sales of new cars, which will react faster, and to the aftermarket, which is always more inert.

What are the prerequisites?

Three main factors determine potential demand:

1. The population is more than 80 million people.
2. Small fleet and consequently low motorization of the population. Less than 100 cars per 1000 people. This is eight times lower than Europe.
3. The old Park. More than 15% of the park is over 20 years old.

Since 2020, Germany, France, and the United Kingdom have essentially begun to circumvent the embargo with the help of a “Trade Support Tool”, as a result, the Iranian car market has grown, doubling to 1.3 million cars per year by 2020 (for example, sales in Russia expected in 2022 are below this number).

The absolute advantage of the market is its links to Europe and especially France because the local company Iran Khondro produces old Peugeot cars under license. The Renault brand is also strong.

Iran’s Top 3 by 2020:

• Khodro Samand (Aka Peugeot 405, yes precisely 405, which was first produced in 1987)
• Peugeot Pars (aka Peugeot 406)
• Peugeot 206

However, for the time being, traditionally strong partnerships with French enterprises cannot develop in full force due to the embargo, albeit reduced, but still not lifted. On the other hand, Chinese automakers are actively entering the Iranian market. So, at the same Khondro plant, the Haima S5 and S7 crossovers are already started to be produced.