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No lack of money, Iranians pay for premium products

08 August 2017 [12:45] - TODAY.AZ

By  Trend

Iran’s untapped market of 80 million people represents a golden opportunity for the international producers, but a Shanghai-based strategic consultant suggests that, French carmakers will have better chances than their Asian rivals to reap the benefits of that market.

Industrial Development and Renovation Organization of Iran (IDRO) cemented a €660 million worth deal with French automaker Renault on Monday for launching a joint venture in the Middle Eastern country.

"Iranians at this point are really paying a premium in order to receive premium products," Raul Heraud, head of financial services at strategic advisory firm Solidiance told Trend.

"I think that in general when we talk about the business scenario there is no lack of cash and so, Iranians are not necessarily looking for the lowest price," Raul Heraud, who frequented Iran on more than dozens of occasions, gave the insight.

Nonetheless, he believes that things change, when we get to the consumer side of the issue and the Asian companies still have a chance to derive benefit from the Iranian market.

"There is no necessity for certain products, such as car batteries, to be of premium brand and therefore market accepts them very well."

Raul Heraud suggests that French carmakers have a competitive advantage for a couple of reasons.

"There is an emotional component, because Peugeot and Renault were the last two Original Equipment Manufacturers to leave, thus the Iranians regard them as two companies that stayed with them really until the very end."

Most of European and international firms had to leave Iran after the West instituted new sanctions on the Islamic Republic, amid increasing tensions of Iran's nuclear program in 2011. Most of nuclear related sanctions on Tehran were removed in 2016, after the Middle Eastern nation reached a nuclear deal with the world powers in 2015.

"I would say, in general, anything that is of European origin is regarded as better quality in Iran," Raul Heraud added.

"The exception to this might be Japanese cars, which, of course, have a high-end, but the French cars are regarded highly in Iran."

There is a strong presence of Asian companies in Iran, including Chinese, Indian and Korean as well as Japanese carmakers.

Koreans particular talks concerned country’s automotive sector. KIA and Hyundai are among the two largest sellers in the terms of market share.

Due to the lack of sanctions with the Asian countries, most of the latter never really left the Iranian market. As a matter of fact, it was a big opportunity for them, when European and American players were forced out of the market due to the sanctions.

"Korean and Japanese products are highly regarded in Iran, but Chinese and Indian products are considered a little bit of a lower quality."

Back in 2015 a campaign to boycott "substandard and expensive" Iranian-made cars fired up social media in the Islamic Republic.

"We see, for example, that recently there was a boycott of locally produced cars in Iran, but they did not only boycott locally produced cars, they actually boycotted Chinese cars, as well. Iranians question: ‘Why do we get low end products? We want to get European and American products’."


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