Editorial: Cuba And The Axis Of Emerging Markets

A year ago, TTAC broke news of back channel overtures being made towards Iran on behalf of General Motors. A number of Chevrolet Camaro Convertibles made their way to Iran via a complicated logistics network and the importations were of dubious legality. But the event highlighted a sentiment in the auto industry that few are willing to openly discuss: the BRIC countries, once the darlings of the emerging markets, have already been exhausted. The search for new markets is on, and that means places like Africa and Iran. And Cuba could be next.

While the French auto makers have established foot holds in Africa, Iran and Cuba represent two untapped markets for auto makers – the only challenge is navigating the complex political considerations that make international trade difficult.

Iran’s auto market is expected to g row to 1.5 million units by the end of the decade – nearly 50 percent greater than Australia’s, and slightly higher than Canada’s. The current sanctions in place against Iran will make it difficult for auto makers to set up shop in the country, but when they come to an end, there will be a groundswell of demand from a country that has a highly educated and relatively affluent population. Iran already has a booming domestic auto industry with long established ties to the French OEMs, but that shouldn’t stop foreign brands from attempting to compete.

Cuba, on the other hand, was on precisely nobody’s radar until the surprise announcement that America and Cuba would attempt to normalize trade relations with one another. But that development, coupled with r apidly changing laws on car ownership, could open up a whole new market in the United States’ backyard. And talk about pent up demand – some 60,000 cars dating back to 1959 or before are still on the roads, held together by MacGyver-esque engineering. To be fair, a trickle of new cars has come into the country, but they are largely restricted to taxi owners and, government agencies and rental car fleets.

The irony of Cuba and Iran’s status as potential emerging markets is lost on nobody, but any enthusiasm should be tempered. The process of economic liberalization will likely take years to fully unfold. But that doesn’t mean that auto makers should defer their preparations.