Dubai, U.A.E., January 17, 2011: Car manufacturers have immense opportunities to tap the passenger cars market in Iran, as the Government's new scrapping policy is expected to phase about 1.2 million passenger cars off the road by March 2012. This is likely to trigger a demand for more than 2.2 million units by 2015 to replace the old models and target new buyers, as well.

New analysis from Frost & Sullivan (http://www.automotive.frost.com), Strategic Analysis of the Passenger Cars Market in Iran, finds that the market sold 1.1 million units in 2009 and estimates this to reach 2.2 million units in 2015.

Government-owned car manufacturers, Iran Khodro and SAIPA, which dominate the Iranian passenger cars market with a combined share of 95 percent, are offering finance schemes at competitive interest rates to attract customers. In 2009, models such as Peugeot 405, Pride, Samand, Soren, and Logan accounted for more than 80 percent of the cars sold in Iran.

The main reason for the popularity of these models is their low cost price due to localization, widespread dealership network, and high re-sale value. However, locally manufactured cars are of lower quality and have outdated designs. There are more than 1,200 auto component manufacturers in Iran, of which, only 129 are Grade-A suppliers.

"The Iranian Passenger car market is dependent on the foreign car manufacturers for the technology and is treated as dumping market for outdated European car models," says Frost & Sullivan Senior Research Analyst Amit Punjani. "Due to the technological constraints, auto parts supplied by the manufacturers are not up to the quality mark either. Components like ABS, Airbags are still being imported"

High inflation and exorbitant import tariffs discourage Iranians from buying foreign cars. Going forward, car manufacturers will also have to manufacture dual-fuel vehicles.

Iran is the seventh-largest producer of oil in the world. However, it is forced to import fuel from neighboring countries due to limitations in fuel refining. While fuel is available at heavily subsidized prices in Iran, the fuel subsidy is likely to be removed by 2011, which is expected to increase the fuel price by 40 percent.

"As a result, the demand for dual-fuel cars or cars with compressed natural gas (CNG) is expected to increase by 70 percent by 2014," notes Punjani. "To meet this demand, car manufacturers are expected to produce a minimum of 50 percent of cars as dual-fuel by 2013."

The political situation in Iran too can pose a problem for business. The country is poised on the edge of a period of increased political instability with the emergence of a new style of reform movement. This movement has become increasingly radicalized over the past few years by the maneuverings of the country's hard-line conservatives.

For any manufacturer looking to enter the Iranian market, the key would be to form a joint venture with Iran Khodro or SAIPA as they hold more than 95 percent of market share. With no presence of the U.S. car manufacturers due to sanctions, there is also a great opportunity for Asian and European car manufacturers to set up their local manufacturing units. Localization is expected to keep manufacturing costs low.

If you are interested in more information on this study, please send an e-mail to Tanu Chopra / Nimisha Iyer, Corporate Communications, at tanu.chopra@frost.com / niyer@frost.com , with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country.

Strategic Analysis of the Passenger Cars Market in Iran is part of the Automotive & Transportation Growth Partnership Services program, which also includes research on the following: Strategic Analysis of Mining Industry and Impact on Off Highway Vehicles Market, Strategic Analysis of Off Highways Vehicles Tires market in India, Strategic Analysis of Electric Vehicles Market in India, Strategic Analysis of Logistics Market in United Arab Emirates, Strategic Analysis of the Logistics Market and Contract Logistics in Saudi Arabia, among others. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

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Contact:
Tanu Chopra
Corporate Communications - Middle East
P: +91 22 4001 3437
F: +91 22 2832 4713
E: tanu.chopra@frost.com

Nimisha Iyer
Corporate Communications - South Asia and Middle East
P: +91 98200 50519
F: +91 22 2832 4713
E: niyer@frost.com

http://www.frost.com

© Press Release 2011