Reporting "Asre Khodro", With easing of sanctions, the market is expected to accelerate and grow strongly at 16% per annum in the coming years with 1.4 million and 1.8 million car sales by 2020. Demographic shift witnessed in the market is driving further demand for premium vehicles. The Iranian middle class, who accounts for 30% of the population, is showing interest in the premium international automotive industry. Coupled with imported vehicle preference and high purchasing power, the premium segment will likely grow by 66% per annum until 2020 – from 7,000 sales in 2015 to more than 90,000 by 2020.
The time for global automotive players to make their mark in Iran is now, while promising opportunities still exist. However, in spite of overall market profile being positive, a number of factors will need to be taken into careful consideration by multinational companies seeking to supply vehicles to the country’s 79 million people.
Given Iran’s historical isolation from the global economy, its effects continue to be a burden on the state budget. But also, the Iranian tax system comes with its complexities and with a high degree of state regulation.
In order to capitalize on these opportunities Iran possesses, foreign companies will need to do research thoroughly. Necessary preparations for entering the market include knowledge of the country’s complex customs and tax regulations and new emissions rules. In addition, automotive manufacturing companies need to decide whether importing or local production is the better option for their business model and whether a greenfield approach is prioritized in place of cooperating with local partners.
Knowing the competitive environment and being familiar with local customer needs are also advised. The most imperative factor, however, lies on the company’s ability to establish close relationships with local institutions and authorities.