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Iran is the new automotive frontier

Wednesday, March 22, 2017 - 07:00
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The emerging automotive sector in Iran, along with easing of international sanctions, can offer new opportunities for suppliers, according to Steve Ganster, director at Solidiance Asia Pacific. Ganster discussed the Iranian automotive market with members of the Overseas Automotive Council (OAC) of the Automotive Aftermarket Suppliers Association (AASA).

Iran’s automotive sector is expected to grow at a compound annual growth rate (CAGR) of approximately 14 percent from 2016 through 2020, with passenger cars and SUVs representing about 54 percent of the demand. The country is home to 30-plus public and private automakers and more than 1,500 auto part manufacturers.

Ganster noted that the auto sector will be an early beneficiary of easing of sanctions, with foreign firms already making significant inroads in Iran. The market is prime for replacement parts, with an average light vehicle age of 10.4 years. He noted that nearly 30 percent of all light vehicles on the road are more than 15 years old.

The drop in Iran’s average vehicle age is due to increased production and the country’s vehicle scrappage program. Iran’s light vehicle parc average age has dropped by seven years in the past 12 years, Ganster said. With further implementation of the scrappage program and planned increase of vehicle production, Iran’s average age is expected to decrease by at least two years by 2025.

The parts and service market of Iran’s vehicle parc was estimated at $5.5 billion in 2015, Ganster said. Industry channel partners include authorized aftersales centers (OEM), independent workshops, auto parts sellers and parts manufacturers.

Authorized aftersales centers are increasing in number and strengthening their services. Especially in the import car market, the competition between OEMs is high. Independent workshops are present even in the most remote areas of the country, and are still popular despite the increase of authorized centers.

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