The Attractive Truck Market in Iran for Major Companies

During the eight years of Mahmoud Ahmadinejad's presidency, the activity of major truck manufacturing companies in Iran decreased, and the products of large automakers like Volvo and Mercedes-Benz were replaced by low-quality Chinese products such as Howo and Dongfeng. This led to numerous problems in Iran's ground transportation industry and made the roads extremely unsafe. In recent years, issues with the brakes of trucks produced by Howo, which were assembled in Iran Khodro Diesel, have caused many fatal accidents on Iran's roads, leading to the Howo truck being dubbed the 'death cart' on intercity roads in Iran. If you travel on many roads in Iran in recent years, you can see the remnants of various Chinese trucks that have gone off the road. With the imposition of sanctions, the limited cooperation of companies like Renault Trucks and Volvo with Iran was effectively cut off, and for several years, Iranian companies became a playground for the low-quality Chinese truck manufacturers. The decline in the transportation system's power in Iran due to economic reasons also harmed Iran's transit fleet, and the decrease in purchasing power due to the economic crisis and recession has caused the cycle of retiring old trucks in the country to face problems. According to the statements of Iran's Minister of Roads and Urban Development, there are currently over 127,000 old trucks over 25 years old operating on Iran's roads. Abbas Akhoundi, the Minister of Roads and Urban Development, stated: 'In the country's road transport fleet, 127,000 trucks over 25 years old are in operation. These trucks consume a lot of fuel and create significant pollution. If these trucks are retired and replaced with standard and new models, energy consumption in this sector would be halved. The savings from energy consumption could quickly repay the costs incurred. Additionally, the environmental situation would improve. However, modernizing the road fleet will cost several billion dollars - just for trucks, more than six billion dollars in credit is needed - which we cannot and do not intend to fully provide from domestic sources. A specific contractual model must be designed, which would require revisiting leasing and lease-to-own arrangements. The issue is that the investor of this plan must be able to secure initial financial resources from the global financial system. Ultimately, there should be partnerships with domestic companies in the construction of these trucks, and then the trucks should be leased so that the costs can be amortized from the lease payments.' Given this extensive capacity, major truck manufacturers worldwide are currently showing interest in returning to Iran. Companies like Volvo and Mercedes-Benz, which have previously considered Iran one of their main production hubs globally, are returning to the Iranian market. Between 2001 and 2005, Iran became one of the five Volvo truck production sites in the world, with production reaching about 12,000 units per year. Truck production in Iran in 2005 was about 30,000 units, most of which were manufactured by prominent companies like Mercedes-Benz, Volvo, Renault Trucks, and Iveco, whereas this figure dropped to about 14,000 units in 2013, with most of the production being Chinese trucks. Chinese trucks, aside from their low safety and high fuel consumption, are of such poor quality that they break down very quickly and incur higher repair costs compared to trucks from well-known global companies. Following the nuclear agreement, it has become clear that four major truck manufacturers, Volvo, Mercedes-Benz, Renault Trucks, and Scania, are preparing for a significant presence in the Iranian market. Two other companies, MAN from Germany and Iveco from Italy, are also likely to join this group. Of these companies, Volvo, Mercedes-Benz, and Scania intend to turn Iran into their production base in the Middle East. Between 2001 and 2005, the export of produced trucks from Iran to the Gulf countries began. Currently, considering the vast demand in the Middle Eastern market for trucks, Iran can cover not only its own market but also that of the region with its truck production. Henrik Henriksson, the CEO of Scania, stated: 'We intend to establish Iran as a center for exporting our products in the region.' Besides Volvo and Scania, Mercedes-Benz also has long-term plans for truck production in Iran. Mercedes-Benz had invested in the passenger and heavy vehicle sector in Iran during the presidency of Mohammad Khatami. For example, this company had increased its investment in IDAM for producing Benz engines and directed ZF Germany towards investing in Iran for producing Benz gearboxes. However, with Ahmadinejad's government coming to power, this plan effectively failed, and just before the imposition of sanctions, this company left Iran. However, after the sanctions were lifted, the German holding Daimler, which owns Mercedes-Benz, signed the first memorandum for resuming production of its products in Iran with Iran Khodro Diesel. In this memorandum, Mercedes-Benz is set to invest directly in Iran and establish a joint company with Iran Khodro Diesel. Stefan Gösner, a senior manager at Mercedes-Benz, stated: 'In offering heavy Benz products in Iran, new products with up-to-date technology will be introduced that have minimal emissions and will reduce harmful gas emissions. We are committed to localizing the production of our products in Iran and transferring technology.'