Future of the Iranian Automobile Market
Iran Automotive Industry Outlook 2025
Within Iran’s 2025 overall economic vision the particular automotive industry vision is defined as follows:
“Reaching the number one ranking in the automotive industry of the region, 5th ranking in Asia and 11th ranking in the world by focusing on competitive development based on technological advancement.”
Although Iran´s vision for 2025 aims for a production of 3 million units, according to current trends and the assumption that no further sanctions will be imposed on Iran within the next ten years, it can be expected that Iran will produce up to 2 million PV by 2025 under the condition that the average growth rate will be the same as it was before 2011. Some of the most significant shortcomings of the Iranian automotive industry include insufficient financial access, poor financial statements in general, and low product quality for a high price.
The Iranian Ministry of Industry has developed a strategic plan for the automotive sector consisting of nine key strategies in order to reach the aforementioned target. The nine key strategies and some main action plans are:
At this moment in time the future of the Iranian automotive industry is being decided upon and thus it is hard to predict. Factors that will definitely have an influence on the future direction (aside from the lifting of sanctions) are the access to financing, international competition, potential joint ventures, and other macro-economic factors. Almost all sources and experts agree that the Iranian automobile industry will remain as one of the key industries of Iran for years to come. Furthermore, many believe that the Chinese players’ market share will diminish after sanctions relieve, and that it will be taken over by European companies. Some potential scenarios include:
Probability | SCENARIO | JUSTIFICATION | RESULT |
---|---|---|---|
Very Low | Automotive industry achieves the vision 2025 | Iran`s automotive industry has both economical and political importance for the government, as well as there is a solid infrastructure for increase in production. Companies could produce much more cars from a technical and capacity point of view. | 3 million yearly car production output by 2025. |
Iran continues with current automotive output rate and under oligopolistic conditions | The government keeps the industry alive, however, insufficient R&D activities are being undertaken to increase the production rate exponentially. Tariffs would still be high and oligopolies will continue to benefit from market conditions. | 2 million yearly car production output by 2025 (linear growth). | |
Automobile industry is terminated and Iran switches to other industries | Costs of car production in Iran are high and Iran cannot compete with strong European and East Asian competitors. Consumers are more interested in foreign brands and the government cannot keep the borders closed for imports of non-domestic cars. | Iran becomes a manufacturing hub for foreign car makers, but Iranian tier manufacturers will dominate. | |
Third big manufacturer rises and takes market share from IKCO and SAIPA | Several parties are interested in ending oligopoly situation within the Iranian automotive industry and by developing a third qualified manufacturer Iran could achieve this goal. | Iranian car production rate surges due to increased competition. | |
Iranian automotive industry stops manufacturing and starts assembling instead | Iran cannot keep up with international competition, however, cannot afford to drop automotive industry altogether. International players show interest in the Iranian market and policies are put into place that do allow car imports without technology transfer and employment assurance. | Automotive tiers remain and the industry turns into an assembly based one for international players, resulting in higher automation and enhanced car quality. | |
Iranian automotive industry goes into joint venture agreements mainly with Chinese companies | China has always stayed with Iran and today is the main economic and political partner of the country. Chinese cars in Iran have seen a sharp increase in sales during the past years and they can compete with their low prices for the Iranian middle class. | Chinese car and parts manufacturers increase their activities in Iran, leading to SAIPA and IKCO loosing their dominance until 90% of the market is in Chinese hands. | |
Iranian automotive industry mainly signs joint venture agreements with French companies | France has been a partner of Iran in the automotive industry for a long time. The Iranian automotive infrastructure is compatible with French technology and it makes the joint venture simple for both parties. However, there are concerns about their accountability during difficult times. | Peugeot will collaborate under a new legal framework with IKCO and Renault may buy some more shares of SAIPA, whilst collaborating a joint venture agreement. | |
Very high | Iranian automotive industry mainly signs joint venture agreements with German companies | There are some reports from the Auto Parts Manufacturers Association that Iran’s automotive part industry will sign joint venture agreements with German companies (e.g. Crouse). As a result this will force other manufacturers to collaborate with Germany. Also, there are some conflicts between IKCO, SAIPA and the French companies, as they neglected the Iranian market after the sanctions were imposed. | The Infrastructure of part manufacturers will change and German technology is demanded. For the new factories the machinery will come from Germany. French companies may have some products to be launched in Iran. |
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