All You Need to Know about Iran Automobile Industry and Market

Rise of Opportunities in the Middle East Automobile Market

Asre Khodro: Iran’s Automotive market has been one of the most important parts of the Iran’s economy.

Reporting “Asre Khodro”, Thanks to good economic growth during ۱۹۹۷ till ۲۰۰۶ and keeping exchange rate constant made Iran one of top ۱۵ countries of the world. In that period, Iran automotive expansion rate was higher than international global rate and in reality after China and India, it was at third rank of the world with average of ۱۲% growth annually. However nuclear dispute and international sanctions and limitation damaged Automotive industry sharply and caused to decline rate of production; but with change in Iran political atmosphere after ۲۰۱۳ elections and returning back of left parties to the power and their intension to open Iran market doors to the world again ; this industry will return to its golden era soon.
There are some issues shall be considered for whom they plan to expand their business free of risk;
Iran automotive market is approximately most risk free one in the world. First with approach of Iran car maker partners in past; mainly French companies, models life time was too long that make local customer tiered, means any new product will be sell-guarantee in Iran. Also with new policy to pricing of fuel and old technology of current product; there is an especial opportunity for low fuel consumption vehicle in Iran.
Second market size has been passed ۱.۵ million and there is potential for passing ۲ million cars annually that make Iran market one the main car market in the world. It means any production plan locally may be completely feasible if situation investigated carefully.

Third; human resource is Iran is young and well educated beside price wise they are cheap really and comparable to china. Beside energy cost is lower than neighbors’ country that make Iran attractive for energy consuming industry such casting.
Fourth; Iran is located in strategic area in Middle East; better weather condition; more industrial infra-structure than others can make Iran a platform for exporting to milieus markets.
Fifth; Iran government needs to support international investors to renovate industry mainly suffered from conservative policies of previous government and embargos. Cost of investment for local investors is comparably high and sources are limited, then absorbing foreign investment is considered as one of the last chances for them.
Last; exchange rate is low these days that made export price acceptable. Especially in industries using general machineries that need low investment on them; finished cost is comparably very low.
There are two solutions available for whom make decision for entering Iran market these days that will enjoy benefits of its vanguard decision; first; they may buy share of exciting facilities that usually required cash flow for row material to produce; that row material is also acceptable as investment by Government. In this way; investors and supplier may receive higher benefit of selling their row or prepared material by participating of selling to end user or OEM. Simply a differed payment will happen with a controlling share as warrantee for investor. It is best solution because factories are suffering cash flow and their machineries have been investment by high exchange rate before. It means practically; machineries is pricing approximately ۳۰% of real cost.
Second; creating a new facilities that in free zones and especial zones could be ۱۰۰% belong to foreign investor and in main land with share less than ۵۰%. To them. In this way; investor may assure about a clear financial situation of company however it takes time.
It shall be considered that legally foreign investor in Iran market will receive official support for their investment in case of any political changes.
Iran is passing transient period these days and both west and Iran need a reliable relation, especially after recent dispute between Russia and West on energy, Iran may considered as most reliable energy source to the west. Then soon international attitude will be normal to Iran, but time to investor may be limited to use this especial opportunity to create a strong base in Iran market

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