Iran: Justified optimism

Large backlog of demands also in the utility vehicle area

For obvious reasons, there are numerous companies that are making preparations to participate in the future market of Iran. An example of this would be Daimler. The globally leading passenger car manufacturer has set the course for a return to the Iranian market, and has already signed appropriate agreements with two local cooperation partners for this.

Wolfgang Bernhard, Responsible Top Manager at Daimler Trucks justifies this fast initiative: “Our utility vehicles have been enjoying an excellent reputation in Iran for a long time now. At the same time, there is a large demand backlog for utility vehicles, most of all trucks.” With the end of the sanctions, one would therefore resume business activities with Iran expeditiously. The declarations of intent with local partners IKD and Mammut Industries are an important precondition for this.

Even consulting companies, lawyers’ chambers and other service providers in the export business see golden times for the German economy. Thus, Ludovic Subran, Chief National Economist at the Euler Hermes Credit Insurer: “The sectors in which German exporters are particularly strong will experience a huge demand in the coming years. German industry has an excellent reputation and stands for quality.”

Iran is a widely developed economy with a predominantly well-educated population. Many people there would love to buy high-value branded products, especially because a section of the population is used to the essentially higher standard of living from the times before the sanctions.

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Machine building: Very good opportunities, but no euphoria

And how do German machine and plant manufacturers who are already being celebrated as the big winners of the lifting of the sanctions, assess the development? Delighted but not excited – with a bit of skepticism – judges Iran specialist Klaus Friedrich of the VDMA: “Very good opportunities but no occasion for euphoria – this is the core statement of VDMA on Iran. The German machine exports in 2015 of less than 600 million Euro could improve to approx. 800 million Euro in 2016, and thanks to the good opportunities, to more than one billion Euro in the subsequent years.”

In view of the conspicuously increased competition from China and Korea, VDMA sees export values of 2 billion Euro only if Iran at least doubles its machine imports; at present they are worth 5 billion Euro. Whether the Iranian economic policy will spur such a growth remains to be seen. The main obstacle to Germany’s fast intervention in business with Iran is the unchanged restrictive business policy of the banks. And exporters would have to do their homework on export control, because the sanctions may have been slackened, but they have not been lifted fully yet.

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