Foreign car makers face challenges in Iran

Iran holds huge potential, but hurdles for foreign car makers remain in the short term even if economic sanctions are lifted.

“There will be a rush by foreign players to position themselves in the market,” said Pierluigi Bellini, the manager for Middle East and Africa at IHS Automotive.

“But the Iranians will want to keep control of the market. They have a lot of regulations in place to limit imports and will insist on transfer of technology to domestic car makers.”

A report from IHS Automotive said that among those well placed to benefit from the opening of the market include French car makers “who have always been there”.

Chinese car makers also have a strong network of importers in the country which was set up before the embargo came into effect. Korean and Japanese manufacturers such as Hyundai, Kia and Toyota look set to benefit because of their strong position in the GCC states.

However, car makers refuse to be drawn in about entering the market.

“As a matter of US law, Ford will remain in full compliance with existing US sanctions and will monitor any changes that occur as a result of the preliminary agreement,” said a spokesman for Ford.

South Korea’s Hyundai also refused to comment.

IHS expects domestic output to rise from next year and hit 1.3 million in 2107.

The Iranian market is bigger than the GCC market. Car makers moved a total of 1.7 million cars a year in Iran in 2010 and 2011, before the impact of the sanctions began to squeeze sales. Sales began to fall in 2012 and were at 800,000 in 2013 before showing an improvement last to 1.1 million units, according to Mr Bellini.

IHS says the market will start to grow from 2017 onwards, when the country is fully integrated into the world financial system. By 2020, the market is expected to eventually grow to sales of 1.8 million units.

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