The lifting of sanctions has breathed life into the commercial vehicle (CV) market, with French and German original equipment manufacturers (OEMs) already in talks with local CV manufacturers to begin the process of market re-entry, according to analysts Frost & Sullivan.

The new analysis from Frost & Sullivan, titled ‘Strategic Overview of the Commercial Vehicle Market in Iran’, finds that the commercial vehicle market is expected to grow to 320,148 units in 2022 from 160,107 units in 2015, at a compound annual growth rate (CAGR) of 10.4 per cent.

The bus segment is likely to grow the fastest, at a CAGR of 34.9 per cent. Furthermore, production capacity utilisation in the medium and heavy duty truck segment is anticipated to increase from 10 per cent to 15 per cent in 2015 to 60 per cent to 65 per cent by 2022, it added.

According to the report, the market had been stagnant, as both external and internal factors had crippled economic growth and trade. Besides, vehicle buyers have been deferring purchases until Western OEMs return to the market. However, the market is highly regulated and foreign companies can enter the market only through joint ventures with domestic participants.

“The dominance of local participants and high import duty on completely built units encourage local production and assembling, thereby reducing reliance on imports,” said Frost & Sullivan intelligent mobility research analyst Marshall Martin.

“Iran has regional access to 15 countries and strategically placed free trade zones for exporting, making it an extremely attractive investment destination for CVs,” he said.

While the vehicles have marginally bigger and more powerful engines, they need superior comfort and safety features. Foreign OEMs will look to make the most of this market requirement by establishing common platforms between different regions and save costs and time in developing region-specific products.

The Iranian market is currently beset by a shortage in cargo and construction projects, leading to reduced demand for trucks. This market situation affects fleet owners’ and drivers’ ability to pay their instalments. Some small companies even resort to smuggling vehicles into the country, making the market uncompetitive.

Martin added: “In due course, the entry of Chinese and Russian OEMs will compel Western OEMs to reduce prices to regain market share.”

“Convergence by both budget and premium manufacturers towards a common price range of $55,000 to $75,000 will enhance the competitiveness of the market,” he added.

Overall, with its huge untapped potential, Iran will continue to be the leading market for CVs in the Middle East. The market will be even more competitive by 2022, driven by the rising demand for quality and reliability.

The analysis is part of the Automotive & Transportation Growth Partnership Service programme. Frost & Sullivan’s related studies include: Global Connected Truck Market 2016 Outlook, 2016 Outlook of the Global Medium-Heavy Duty Truck Industry, Impact of Euro VII on European Heavy-Duty Truck Market, Strategic Corporate Profile of CNHTC Portfolio and Connected Truck Market in Japan. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants, it added. – TradeArabia News Service