Chinese auto manufacturers seem to benefit from the gap created by the absence of European car manufactures in Iran. Iran dominates the Middle-East’s car market with the highest demand. Chinese auto manufacturers such as Chery Automobiles Co., Jianghuai, and Lifan Industry Group Co. have capitalized on the opportunity to increase their share in the Iranian market, from 1 percent in 2011 to 9 percent in 2016, according to researcher IHS Automotive. Due to the sanctions put on Iran because of its activities related to enriching uranium, European manufacturers were compelled to restrict their business in Iranian market. With the talks of sanctions being eased depending upon the proposed nuclear pact between Iran and the U.S., western automakers are again looking at the opportunity to enter the Iranian market.
The Chinese auto manufacturers have local partners in Iran who build cars from the kits supplied from China. IHS analysts mentioned that this has resulted in Chinese automakers offering the cars at cheaper prices than their European and Japanese counterparts. Also, limited availability of European and Japanese models has led the buyers to look at the models manufactured by the Chinese auto manufacturers.
In the hope of the success of the nuclear negotiations and the sanctions getting lifted, French automobile giants such as Peugeot and Renault are talking to Iran’s biggest car maker Iran Khodro Co. If sanctions are lifted, the European auto makers would enter into joint ventures with the Iranian car manufacturers. This might affect the business of the Chinese manufacturers as they suffer from the reputation of offering low quality products.