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.
Auto parts sellers are composed of a large number of importers, wholesalers and retailers, estimated at about 21,000 companies. As of 2016, an additional 750 candidates have applied for auto part selling licenses in Iran. The country’s parts manufacturers may lack design and technology capabilities, but they compensate with a full spectrum of services. CROUSE and EZAM are the leading players, manufacturing engine parts, transmissions, steering, brakes, etc.
Sanctions by the United Nations and the United States continue, but with the easing of some sanctions, key global auto part makers can re-establish their presence in Iran and reclaim their share of Iran’s market. There are additional legal challenges facing American companies in Iran, but these can be overcome, Ganster noted.
Teams setting up operations in Iran cannot be made up of either U.S. citizens or U.S. passport holders. Transactions using U.S. dollars are not allowed, but the Japanese yen, the Euro and the yuan are accepted. Products cannot be manufactured on American soil, but U.S. branded products manufactured in other countries are allowed.
For more information about Iran’s automotive market, contact Solidiance at [email protected].
Upcoming trade mission
AASA and OAC are planning a trade mission for 2017 in conjunction with DOC and the U.S. Commercial Service to Johannesburg, South Africa. Set for Sept. 25 to 27, trade mission participants will meet with South African buyers and distributors in Johannesburg; learn more about the South African aftermarket by visiting distributors' facilities and receiving market briefing from the Commercial Service; and exhibit at or visit Automechanika Johannesburg (Sept. 27 to 30) to meet additional buyers from throughout the region.
More details will be announced soon. For more information about the OAC and its programs, contact Ben Brucato.
Editor’s note: The OAC promotes the sale in foreign markets of automotive and heavy-duty products manufactured in North America. Those products include components, accessories, chemicals, hand and power tools, service maintenance and repair equipment, and paint and body supplies for both cars and trucks. OAC has more than 350 members in more than 40 countries. More information is available through its website, www.oac-intl.org. AASA exclusively serves manufacturers of aftermarket components, tools and equipment, and related products that support 710,000 employees in the United States. AASA is the light vehicle aftermarket division of the Motor & Equipment Manufacturers Association (MEMA).
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