By on November 26, 2013

parsimg1fi9

Weeks prior to the historic deal reached between Iran and the “P5+1″ group of nations, TTAC reported on some of the machinations going on behind the scenes regarded the United States, France and their respective auto industries ability to do business in Iran. We put forth the theory that any deal with Iran would be a boon to auto manufacturers, who would have access to a market expected to be worth 1.5 million units in a few short years, with a very young population and a standard of living that is substantially better than many highly touted emerging markets.

At the time of publication, we encountered significant dismissal, if not disagreement. But as it turned out, negotiations had been ongoing since the start of 2013, and the preliminary deal appears to make the auto industry a big winner.

Within the next 6 months, the auto industry is expected to inject as much as $500 million into Iran. The auto industry, currently worth over 1 million units annually, will be a hotly contested ground for foreign firms looking to break into the market.

Despite apparently being muscled out of Iran by their alliance with General Motors, PSA’s arrangement with GM is now as good as dead, and that means that PSA has the chance to claw their way back to the top of Iran’s market. Last year, PSA sold nearly 458,000 units in Iran (CKD kits which are being erroneously referred to as spare parts kits). Renault, which sold roughly 100,000 Logans in Iran last year, will also be able to resume business.

But American firms also appear to have designs on Iran’s auto market, with French firms becoming increasingly concerned that American companies are trying to muscle them out of Iran. Speaking to Just-Auto, an unnamed official from IKCO, PSA’s former partner in Iran, said

“This is a new day for automakers. More than [just] previous partners, we can also host more automakers which are interested to come to invest in the automotive sector of Iran.”

French officials have previously asserted that GM’s desire to have PSA end its relationship with IKCO was a way to clear out Iran’s auto market prior to the resumption of trade between the two countries. Indeed, the sanctions regime, as well as pressure from GM, caused Renault and PSA respectively, to withdraw from Iran – leaving a 585,000 unit hole in a 1.2 million unit marketplace.

Previous TTAC reports have outlined how GM officials have been clandestinely meeting with Iranian officials via intermediaries – at the time it appeared to be in violation of sanctions, but new information, asserting that high-level talks between the two countries had been going on since early 2013, have given those discussions some legitimacy.

But now, Iran is open for business not just for GM or any other American firm, but auto makers in Germany, Italy and beyond. The broader questions – whether the deal between Iran and the West is a good one, or whether it’s worth negotiating such a deal in return for the associated economic opportunities – are best left for another arena. What’s germane to our discussion is the future of Iran’s auto market and who stands to benefit.

A foothold, if not outright dominance, of a major emerging market is substantial prize for any automaker forced to compete in a mature global market with an over-saturation of brands and increasing need for volume and scale. Prior to the deal, auto makers were looking to Indonesia, South Africa  and other markets that are substantially poorer, with lesser prospects for growth. The BCG report on emerging markets even shied away from speculating on Iran due to political instability. But all of a sudden, Iran is now open for business, and by the end of the decade, its auto market is expected to be 50 percent larger than Australia’s. It’s unclear which auto makers will rush in to this market. But Iran appears to be wasting no time.

Get the latest TTAC e-Newsletter!

29 Comments on “Iran Is Open For Business: 1.5 Million Annual Unit Sales At Stake...”


  • avatar
    romismak

    Finally some good news for PSA, Fiat has Chrysler, Renault has Nissan and PSA is bleeding with Europe down, withdrawing from Iran, failed alliance with GM, but it looks like it can all turn out, with Dongfeng they can be bigger in China or Asia generally and if they will come back to Iran they will be big player again. About Iran, it was all matter of time, but i am glad it happened sooner than later, Renault, Kia were also big in Iran so we will see how active they will be there.

  • avatar
    toplessFC3Sman

    All this talk about the Iranian Accord implies that Honda has already won…
    .
    .
    .
    *chirp*
    .
    I’ll see myself out now.

    • 0 avatar
      Rod Panhard

      I think you’re being very Civic minded about the recent thaw of relations with Iran. Whether one agrees with the deal or not, we did not have to Dodge the Dynasty of Ali Khameini, unlike previous Ayahtollahs. Will Khameini decide by FIAT what vehicles can be sold? And if they start selling Chryslers in Tehran, will we be accused of Imperialism?

  • avatar
    alwayssmilin

    I always want to see markets opening for America. Not the case here!! IRAN deserves nothing from us or the world. The only boom from these lunies will be in the form of a nuclear detonation in the future!! Lest we forget all those years in IRAQ these mullahs are responsible for many the bombs that killeed and maimed our young men!! I think it wrong to do business with a terrorist state even NORTH KOREA!! Principle above profit!!

    • 0 avatar
      philadlj

      The entire country of 77 million isn’t loonies. Many if not most of them are just people, like you and me, trying to live good, honest, happy lives and provide for their families.

      Obviously, to fulfill this promise, they’re going to need more Peugeots. A LOT more.

      • 0 avatar
        Athos Nobile

        “Many if not most of them are just people, like you and me, trying to live good, honest, happy lives and provide for their families”

        ^^^ THIS. Many don’t even agree with the government.

        “they don’t have industrial capacity to fulfill demand”

        I am not so sure of that. Check your sources.

    • 0 avatar
      Battles

      If that’s what you think of them, don’t you think they deserve to drive Peugeots, Renaults and GM badged hatchbacks?
      Take them down from the inside, break their spirits with poor build quality and a terrible driving experience!

    • 0 avatar
      Mr Mk3

      They just hate our freedom so damn much. Or perhaps they take some issue with our international meddling. The US deposing their democratically elected leader and propping up a brutal dictator that was more friendly with western business might have something to do with it. The end result was the fundamentalists seizing power in a rigged election after ousting the Shah.

      Anyway, to the topic at hand. Iran becoming another global auto consumer is an inevitability, they don’t have industrial capacity to fulfill demand. If the American or Europeans don’t jump on it, the Chinese sure as hell will.

      • 0 avatar
        MBella

        We can’t let facts interfere with our propaganda. A country that has never done the United States any harm even after many instances of the US doing otherwise. Overthrowing their democratically elected pro western leader and re-installing a brutal king. Or how about funding Saddam Hussein’s war effort against them.

        I think the Chinese point you make Mr Mk3 is the actual reason these sanctions are being lifted. In today’s world the US sanctions will end up just hurting the US and our own companies. There are plenty of other nations willing to do business, and it just keeps us out. I know Boeing was upset last year because Cubana was updating their fleet and Boeing lost by default because of our sanctions. The couldn’t even submit a bid. Who does it hurt? The Cubans? Or the people who would have built and supported the Boeing aircraft. It’s just shooting us in the foot in the end.

        • 0 avatar
          Mr Mk3

          While globalization isn’t a universally good thing, the one positive end is today’s enemies tend to become tomorrow’s consumers. It wasn’t that long ago that a McDonald’s in red square would have been a preposterous notion. Never mind Buick becoming a major player in China, they’d probably commit you for that kind of postulation 30 years ago.

          “I am not so sure of that. Check your sources.”

          Iran’s industrial capacity is likely overstated. They do have many joint ventures and their industry has exploded since the turn of the millennium, that is undeniable (they even export). I just have doubts they can keep up with their rising middle and upper class with demands for more premium offerings that their industry likely cannot provide at this time. From my understanding most of their capacity is in industrial/commercial vehicles.

          • 0 avatar
            Athos Nobile

            “Iran’s industrial capacity is likely overstated.”

            Likely. I could agree with you on this to some extent.

            But from what I know, they have in place enough capacity to supply their internal car market.

            Whoever gets in there is not only after their market, but also for that capacity and the fact it can be used as an export base to the Middle East.

        • 0 avatar
          Pch101

          “A country that has never done the United States any harm…”

          The Iran hostage crisis was a bit of a downer.

          • 0 avatar
            racer-esq.

            If you want people to respect your embassies you should not use them to launch CIA coups.

          • 0 avatar
            Pch101

            Just about every country uses its embassies and consulates for espionage. The US is not unique in that respect; it’s part of the game of diplomacy.

          • 0 avatar

            Wait a minute, diplomacy is a game? Diplomats seem so serious!

          • 0 avatar
            Pch101

            The Dodge Diplomat belongs in the unserious category.

          • 0 avatar
            racer-esq.

            Espionage is not the same as orchestrating a coup.

          • 0 avatar
            Pch101

            Irrespective of foreign policy, it’s considered bad form to attack an embassy and take hostages. Even nations that go to war against one another don’t do that.

            The Iran hostage crisis crossed a line that shouldn’t have been crossed. It understandably casts a pall on relations today.

          • 0 avatar
            MBella

            That’s like the school bully who finally gets clocked in the face crying to his teacher.

            Also, not one American was harmed. Something that can’t be said the other way around.

    • 0 avatar
      motormouth

      You don’t seem to be smilin’ now, alwayssmilin.

      • 0 avatar
        alwayssmilin

        Motormouth Im always smilin!! Especially at the foolishness of people who think it wise to do business with a terrorist state,Who are responsible for the murder of many QAmericans,Even beiruit!! But some people are for crony capitalism !! Principles and honor dont matter to some!! Just the money!! Either way I still love cars!! People are entitled to their opinion!! I dont haveto agree with it though,and can speak out when I feel somethings wrong!!

  • avatar
    dmw

    “But now, Iran is open for business not just for GM or any other American firm, but auto makers in Germany, Italy and beyond.”

    False. U.S. sanctions barring dealings in property Iran or Iranian nationals by Americans, i.e., selling things there, are not affected by the deal. Iran is not now “open” for any U.S. business. They only change regarding cars may be that foreign producers are not subject to “secondary” sanctions for produting cars there (or selling CKDs). They could always sell finished cars. Woe betide any U.S. company or person foolish enough to think that he can go sell a car in Iran now.

  • avatar
    tjh8402

    the agreement is only for six months…sounds like a big bet to go all in on the Iranian market when you may be back to square 1, or even square 1 minus 1 (military action) 6 months from now

  • avatar
    84Cressida

    Among other things, the agreement lets Iran purchase spare parts for their civil aircraft fleet. If you’ve ever been to Iran, a lot of the airliners there are 727s, older 747s, A300s, and there is even one airline (Saha Air) who until very recently was the very last airline in the entire world to fly 707s with commercial passengers on them.

    Toyota pulled out of Iran in 2010. I wonder if they’re watching what is going on and are considering returning.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributing Writers

  • Jack Baruth, United States
  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Vojta Dobes, Czech Republic
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Cameron Aubernon, United States
  • J Emerson, United States