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Iran Autos Report Q1 2012
Business Monitor International, Jan 2012, Pages: 48
Business Monitor International's Iran Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Iran's automotive industry.
Given the hard-line stance of the regime, along with the West's unwillingness to use military force, BMI expect economic sanctions on Iran to remain in place. However, economic sanctions against Iran have resulted in the government prioritising the development of a strong domestic autos industry.
BMI sees plenty of growth and investment opportunities in Iran, highlighting the autos industry (alongside pharmaceuticals and telecoms) as having the most potential.
The autos sector has been expanding in recent years. Car production in Iran increased by nearly 5% yearon- year (y-o-y) to 1.09mn units in the first eight months of the Iranian calendar year, as of November 20. Although BMI does not see economic growth in Iran surpassing 2.2% in 2011 and 2.2% in 2012, expansion in economic activity appears to be accelerating and BMI expects stable vehicle production and strong sales over the next five years. BMI expect total annual vehicle sales will reach 2.24mn units in 2011, rising to 2.89mn at the end of our forecast period in 2016. These estimates are broadly in line with our last quarterly forecasts. However, BMI have slightly revised up our production forecasts this quarter. BMI estimate 1,409,575 vehicles will be shifted in 2011, rising to 1,421,991 units in 2016.
The country's car industry has witnessed growth in recent years primarily on the back of domestic carmaker Iran Khodro Industrial Group (IKCO)'s aggressive production and expansion plans. IKCO is targeting production of 850,000 vehicles in 2011 and plans to increase annual production to 1.5mn units by 2025. Large government subsidies and trade restrictions have reduced competition in the industry and facilitated strong domestic growth, although those measures have also hidden financial and operating weaknesses.
In November 2011 IKCO broke previous monthly production records, Zawya reports, when it made 75,871 vehicles. It has produced a total of 449,179 units since March 21 2011. IKCO's car production reached 350,631 units in the first half of the current Iranian calendar year ending March 20 2012. The company manufactured 74,857 units of the Peugeot 206 and 74,587 units of the Peugeot 405, according to IKCO's deputy CEO, Hussein Najari. He added that 66,733 Samands were rolled out, along with 49,451 Bardo pick-ups. IKCO intends to increase car production to 3,180 units per day.
IKCO reported a record between March 21 2010 and February 16, registering a 13% y-o-y increase in passenger car output to more than 685,000 units. It is expecting still further increases for the next financial year, which started March 2011, setting a total production target of 850,000 vehicles, which will see the company considerably surpassing its long-held target of a 50% share of the Iranian market. IKCO plans to increase annual production to 1.5mn units by 2025, to take advantage of the 9.5% growth in the Iranian automotive market in 2010.
As the Iranian autos market becomes saturated, continued growth will rely on higher export volumes in markets abroad. IKCO has been expanding its ties with Turkey through joint ventures (JVs), for example. That said, while Iran's new car models meet Western emissions standards, issues of quality and operational weaknesses, as well as the potential for more stringent sanctions, signify that growth in the sector may be restricted to markets with limited purchasing power. Nonetheless, in a bid to increase its share of the international market, IKCO intends to export 9% of its output in 2011, amounting to 75,000 vehicles, before reaching 16% in exports by 2014. The company exported 40,000 units in 2010, including 30% of the total
production of its Samand model. IKCO also hopes to take a 51% share of the Iranian market in 2011, while improving the quality of its products. In July
2011, IKCO outlined a detailed plan to be implemented over seven years. The plan involves designing and manufacturing two new platforms and 11 new
cars. The carmaker also intends to adopt new marketing strategies in an effort to export 16% of its output in the coming three years and enhance its
global market share. IKCO confirmed the plans in May 2011, revealing that the launches would be in place by 2018. Mass production of Iran's first
domestically made vehicle, the Dena sedan, is set to commence in March 2012.
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