Lifting of Sanctions Iran: Good Market Entry Opportunities for International Automakers

The lifting of international sanctions against Iran presents a historic opportunity for automotive OEMs. Experts anticipate solid economic growth of more than 4 per cent per year. Added to that, the country has a population in excess of 78 million—many of them young, well educated and very interested in imported goods.

All of this makes Iran a promising market for the international automotive industry, as for many others. In the coming five years the Roland Berger experts expect to see new car sales double to top some 1.8 million vehicles.

Companies, however, need to do their homework if they want to develop the Iranian market: successful engagement will be difficult without a thorough knowledge of the national specifics in Iran. It is with this in mind that the automotive experts from Roland Berger published their latest study, “Iran – A historic opportunity for automotive OEMs”, in which they analyze the Iranian automotive market and describe the conditions that OEMs need to have in place in order to successfully do business in Iran.

“Iran makes an extremely interesting market for European automotive OEMs in particular,” said Philipp Grosse Kleimann, Senior Partner at Roland Berger. “Following the lifting of sanctions we expect the economy to grow 4 to 5 per cent every year through 2020. The country has a young population, too, signifying a growing pool of potential car buyers. And Iranians like the high quality of Western products.” In fact, 87 per cent of Iranians value imports ‘Made in Germany’, 85 per cent anticipate high-quality from American products and 80 per cent expect French and Japanese brands to deliver quality.

Booming new car sales, especially luxury cars

After the Iranian vehicle market was reopened to foreign automakers in November 2013, positive effects began to materialize as early as 2014. The Roland Berger experts anticipate new car sales rising at an average rate of 18 per cent per annum through 2020, while the premium segment could even see annual growth approaching 78 per cent. “Sales are likely to grow particularly fast in the years post 2017,” said Grosse Kleimann, adding, “By then, Iran will be fully reintegrated in the international financial system.” New car sales could rise by some 27 per cent a year from 2017 onward.

The country is much more than just an interesting sales market. “Iran is also strategically well placed to serve as an export hub to other markets in the Middle East and Asia,” said Santiago Castillo from Roland Berger Middle East. “On the one hand, the country benefits from a favorable geographical location, and on the other, the Iranian government has announced tax breaks for OEMs who produce cars in Iran for the export market.”

Important factors for successful market entry in Iran

The lifting of major sanctions provides a historic opportunity for foreign automakers to enter the attractive Iranian automotive market. But the Roland Berger experts are quick to point out the risks: “For all the positive forecasts, business success in Iran is not a foregone conclusion,” said Alexander Brenner, co-author of the study. “Automotive manufacturers really need to do their homework on the ground prior to entering the Iranian market so as not to be tripped up by local hurdles.”

* Content Source: Roland Berger Holding GmbH

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