International series Iranian perspective
The market promises many things. For the first time after a 10-year embargo, the German manufacturers are again at a trade fair in Iran. Whether it is worth the pioneering spirit, will probably be revealed later.
„“Everyone wants it” Hartmut Ortlepp is convinced about that much. But how many can afford his drilling machines? Managing directors of Maxion, Jänsch and Ortlepp GmbH from Pößneck don’t know the answer to this. Outdated technology, small financial resources, harder payment transactions, weakening key industries– ten years of nuclear embargo have troubled the Iranian industry. And yet AMB Iran is filled with optimism: German pioneering spirit meets Iranian hunger for solutions and progress.
The immigration formalities are cumbersome. Once on the airport, even the European female managers obediently cover their heads with a headscarf. Who wants to pay, needs a thick wad of Iranian Rial, since the credit cards do not work. As strange as this country further seems, Iran is not a new market for many exhibitors in the exhibition halls of Boostan Goftegoo Exhibition & Conference Center. In 1992 Germany has exported machine tools worth a good 190 million Euros in Iran, in 2014 it was still 13.3 million. The Association of German Metal Traders [VDW (Verein Deutscher Werkzeugmaschinen)] and the Stuttgart Trade Fair have enough potential to export the successful AMB model after the end of sanctions in cooperation. More than 110 exhibitors immediately went along at the premiere and filled good 5000 m2 of exhibition area.
The business area of Retrofit
Jan Viesel, Managing Director of Georg Maschinentechnik from Neitersen, is one of them. “Till now no one would like to invest one million in a new pressing plant”, he ends with a smile. He is happy nevertheless. His company produces ball cage punching machines among other things. He is here to find multipliers for the First-Tier-Supplier of the local automobile industry. Iran Khodro and SAIPA produce at least one million small cars per year. He sees enough room for his niche products. Otherwise he would not go so often to trade fairs, but would believe in the demand of this market. And this is true only for Retrofit projects.
Old equipment, which is still working can also be a business for Burkhard & Weber. For Benjamin Braun, Area Sales Manager, many premium contacts are reviving, “Existing clients from the time of boycott”. The technical knowledge of the visitor isimpressive, “But also the technological need to revive”, he sums up his interview. He was not yet able to gauge whether the gap will be better filled through the modernisation of old machines or by replacing them by new equipment.
Second-hand as emergency measure
There seems an obvious trend for the trade of used machines and it is represented copiously in the trade fair: Be it HD Werkzeugmaschinenhandel, Leyendecker & Hollmann, Pressen Haas or the S+B Maschinenhandelsgesellschaft – all of them rely on money and time. “Once new orders come, this market shall need affordable machines– AT ONCE”, Manfred Stein of WST-Stein speaks for the entire used machines-industry. Klaus Reinauer of Eppinger is more sceptic for a tool manufacturer: “Well, for starters they must have the machines for our tools”. He is pleased with a pioneer role all the same: “The time to modernisation will come, and that’s when we come into the picture.”
No one knows the market as Mohammad Barzegari does. Long ago he imported Chinese machines in Iran; today he releases the most important technical medium. His “Iran Manufacturing Production Magazine” appears in a circulation of 8000 copies, there are almost 17000 users following his Social Media Channel. He describes the core market of Iran using both the large automotive manufacturers and their around 1600 suppliers, about good 1000 companies in the oil and petrochemical industry, over 1000 essential companies in the housing construction as well as the gas and water management and 250 bigger companies in the energy management with their requirement of turbines.
Money, the biggest hurdle
With all the rejoicing about the return of the foreign countries, it warns us about great expectations: The Iranian industry is weak. President Hassan Rohani’s policy of “Change though trade” groans under the legacy left behind by his predecessor Mahmud Ahmadineschad. Government debt of more than 70 billion US Dollars and an inflation rate of 40 % and the clear depreciation of the Iranian Rial “has almost tripled prices of a small car of Saipa”. As a result, the sale collapsed almost as dramatically as the prices of oil, the second crucial source of revenue of the Iranian industry.
“The embargo has ended for the foreign countries”, Barzegari calls another aspect into play, “but not yet for the Iranians”. He goes for additional difficult financial transaction. German banks still do not acknowledge the Letter of Credit (LEC) for fear of the American penalties; further, the payments must be redirected across third countries in the Arabian world. So many obstacles, less chances, Mr. Barzegari? “Anyway. The domestic economy is compelled to modernise due to pressure from foreign products.”Especially the automobile industry has to make up for a technological stagnation of several decades.
Will Made in Germany lead the way?
Friedrich Wölfel, Head of Department of Automotive at Kapp Niles bets on it. “There was one customer today who wants to establish a strategic positioning with our gear grinding machines– as one of the firsts, who produces with German technology.”Even at the time of launching one relies on the effect of “Made in Germany”, although the Chinese parent group, the Shenyang Machine Tool Group has catered even during the embargo in Iranusing its affiliated group SMTCL. “But those were machines with rather very simple technology”, stresses Managing Director, Xin Guan. Now the specialist for machining centres can strike out again with its machines for the manufacturing of wind mills or turbines.
Anton Gruber is not afraid of the Chinese key players. As one of the few exhibitors, the Sales Manager at FPS Werkzeugmaschinen brought along a machine. It cost him around 5000 Eurosto transport his milling machine FPS 500 M. “But if I want to sell a machine for 75,000 Euroshere, then I must show the performance gap to the Chinese suppliers”, he is convinced of market opportunities.
Risk with Donald Trump
This is the reason why VDW and Stuttgart Trade Fair want to bring “more machines and more exhibitors” in Iran next year from 23rd to 26th May in smart, new exhibition grounds in Schahr-e Aftab, the “City of Sunshine”. German organisers and the Iranian Association Satsa have recently signed a Memorandum of Understanding. Thereby it did not deal only with AMB Iran 2018, but also with potential professional exchange programmes.
The exhibitors and also the economic leaders agreed that a dark cloud hovers over all the spirit of optimism. If Donald Trump wins the American presidential elections then even the religious hardliners in Iranian politics will gain new popularity. Then the “Change through trade “is seriously jeopardised.