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Iranian automotive aftermarket opens up

Mar 8, 2016

Middle East’s largest automotive producer returns for business amid lifting of global economic sanctions

Dubai, UAE: More than 150 industry professionals gathered in Dubai today to unlock the Iranian automotive aftermarket’s vast potential, as the recent easing of economic sanctions sees international manufacturers flock back to the Middle East’s largest auto producer.

The nuclear agreement between Iran and the P5+1 has elevated the Islamic Republic out of three decades of international isolation, with the country’s automotive sector enjoying the benefits as the first wave of economic sanctions were lifted earlier this year.

European manufacturers such as Daimler and Peugeot are already back in the fray after pulling out of Iran several years ago, while more are expected to follow suit in a country which, according to market research institute GfK, is the world’s 18th largest automaker.

The opportunities and trends of the Iranian automotive aftermarket post-economic sanctions was the hot topic at the 7th Automechanika Network today, attended by manufacturers, distributors, wholesalers, retailers, media and industry experts with eyes firmly focused on the next big growth market.

The big turnout is no surprise; according to GfK, 14 million commercial and passenger vehicles are currently plying Iran’s roads, while its automotive sector is the country’s 2nd most active industry behind oil & gas, accounting for for 10 per cent of its Gross Domestic Product and 4 per cent of its workforce (700,000 people).

Decades of economic stagnation as a result of the sanctions has affected activity – as of 2013, the country ranked a lowly 79th in the world in automotive per capita, at 178 per 1,000 of population.  But with a population of 78.4 million, Iran and its automotive industry is now on the come-back trail.

Ahmed Pauwels, CEO of Messe Frankfurt Middle East, organiser of the Automechanika Network and Automechanika Dubai, the Middle East and Africa’s largest automotive aftermarket exhibition, said: “With a population of nearly 80 million and a land mass the size of Western Europe, Iran is a country with huge potential.”

“It’s also the highest international visiting country to Automechanika Dubai.  With the easing of economic sanctions and a more conducive business environment, we can expect to see more Iranian exhibitors and visitors at the show, as Dubai reaffirms its position as the prime re-export hub between Iran and the rest of world.”

While Iran looks set to pick up from where it left as the Middle East and North Africa’s automotive production hub, its domestic market is also growing rapidly.  According to analysts Frost & Sullivan, more than 1.4 million cars were manufactured in Iran by the end of 2015, while it’s estimated that 2.3 million vehicles will be sold in the country by 2020 at an 18 per cent annual growth rate.

Hence the large presence of major industry players at the 7th Automechanika Network.  Soodeh Habibi, Commercial Manager of GfK Iran, was one of the guest speakers: “Following the nuclear deal and gradual relief of sanctions, the Iranian economy is expected to recover, assisted by a rise in oil revenue, regained access to frozen assets of about US$1 billion, and renewed foreign direct investment,” said Habibi.

“Being a vast young country, Iran is a huge market for a large variety of manufacturers which are recently racing to enter the market legally. A direct result of this is a highly more competitive market in which winning requires strategic planning and implementation.

Habibi added: “Even more opportunities are up for grabs for automotive industries in Iran, considering that 70 per cent of the Iranian population is urban and according to UN, Iran has the highest urban population growth rate in the world.”

Subhash Joshi, Industry Manager for Automotive Practice at Frost & Sullivan, another speaker at the 7th Automechanika Network, said: “Iran by far, is the biggest automotive market in the Middle East with more than 16 million vehicles operational today.

“Due to economic sanctions, global players were not allowed to deal in Iran, which restricted various technological advancements that the global automotive industry has seen in the last couple of years.

“Now that the sanctions have been lifted, local authorities are more aligned to the ‘Made in Iran’ strategy, promoting Iran as one of the key exporting counties in the region which shares its borders with almost 15 countries.  Opportunities in this vastly untapped market vary from Tier 1 suppliers to OEMs to service providers.”

The Automechanika Dubai Network brings together key industry players to discuss different topics related to the regional automotive aftermarket.  The biannual gathering is a regular feature of Automechanika Dubai, the wider Middle East & Africa’s largest trade exhibition for the automotive aftermarket. 

Now in its 14th edition, Automechanika Dubai 2016 will focus on the six core product groups of Parts & Components; Electronics & Systems; Repair & Maintenance; Tyres & Batteries; Car Wash, Care & Reconditioning; and Accessories & Customising.

The annual three-day event is expected to attract more than 30,000 visitors from 134 countries. Its global appeal will be underlined by the presence of 21 official country pavilions and 38 international trade associations, while 88 per cent of exhibitors, and more than half of the visitors are expected to come from outside of the UAE.