Entering through the Iranian Automotive's Market: Facilities and Infrastructure

Author: Nader Vahhab Aghaei, Senior Expert of Aftersales Service (nader.aghaei@outlook.com)

Prior knowledge of the market is the pre-requisite of any organization to enter new markets. Investment in the potential hungry market of Post-sanctions is desirable. So the organizations that are planning to enter the Iranian markets, need to identify features and capabilities of the automotive industry, especially in the area of services so that they could be superior to their competitors.

For this purpose we intend to consider the current status of each of the factors in this industry:

The Government:

The task of government in the field of automotive industry is to implement macro policy, micro policy, monitor, control, invest in and compete with the private sector; in the competition, the government sometimes provide the interests by formulating policies. For example, according to the passed laws, to encourage investors to produce, the government, requires fewer complications in the Complete Knock Down (CKD) than Completely Built Unit (CBU) importers. As a result the production of cars in the country costs less than similar foreign models and the customer is tempted to buy domestic cars. In addition, domestic vehicles’ warranty is required to supply three-year warranty but the imported similar models are obligated to supply a five-year warranty. It is not clear that this paradox is in the interests of consumers or producers. Even the government have not been able to satisfy the industry owners with regard to this problem. The government's oversight role develops policies that are not regarded in its duties. But the negligence of the supplier, has caused the government to set a more prominent role for itself. The intervention of the government in the sales and Aftersales Services and policies of organizations has led to the reduction of creative and innovative ways and the organizations have content themselves with the minimum interests developed by the government. The life time warranty of a foreign vehicle is limited to 5 years so it would be better for the supplier to reduce costs in a market which has no competitors. Government policies in all areas of production, supply and Aftersales Services, makes organizational politics reject the competitive mode.

The Automotive Supplier Organizations:

Because of existing laws governing the country, the importation of cars was not possible until 2006. That's why leading vehicle suppliers were limited to Iran Khodro and Saipa. The presence of professional managers, who were familiar with market conditions made Iran Khodro to use the Peugeot companies’ policies and with a very noticeable change developed a standard and up-dated network of representatives. Creation of Blue Box and standardized space of sales and Aftersales Services in all representatives, required the employment of technical experts, development of new methods of ordering spare parts, aftermarket branding and offering of a variety of new services to clients; these policies were adopted in the new management system and resulted in the development of the two companies. But by removing the import prohibitions and permitting the imports of Hyundai and Kia, it was observed that the policies of these two international companies, affected Iranian companies and resulted in the development of representatives as well as the market. Hyundai’s policies and its Iranian team at that time led to a change in the extent of customer domination culture and provided new services to the customers. But at a time when these cultures were supposed to remain as a fixed culture in the of society, the sanctions started and restrictions on imports, lack of supervision and the international parent companies caused this culture making to be stopped. But the two short experiences indicated the existence of codified standards and professional teams would result in an appropriate improvement in the level of customer services.

Dealership Networks:

More than 2,500 dealership and service networks operate under the automotive supplier companies. All of these representatives have been equipped with a minimum of equipment and, due to the policies issued by the ministry, have hired some technical experts and sales managers. However, despite the ongoing strictness, a significant change in the level of customer satisfaction in sales and Aftersales Service is not observed. This is due to the fact that no direct interest is achieved through customer satisfaction for the representatives. Sometimes, the representatives have refrained from accepting customers because of the consequences that may result and have ignored the gift of loyalty. Besides, many representatives are now seeking compensation for their expenses and as a result have defined various activities for this purpose that are sometimes parallel to the organization. Therefore, the newly arrived organizations must plan an economic justification for their network to select representatives; if there is no cost to representatives in some areas, the attractions should be created for them so that the possibility of parallel activities is generated.

Regulatory Agencies:

Evaluation companies in the automotive industry, play a multi-role. The defined role of them is similar to the role of the police as an observer, judge and executor. These organizations develop their own rules and guidelines, and resort to self-monitoring and self-punishment. However, any of these factors is the responsibility of a specific organization. Assessment indicators in the industry is exaggerated and in some cases even interventionist. The main indices such as the customer loyalty is undefined and customer satisfaction is measured based on parameters that are not related to the situations. Cooperation with foreign partners and modeling assessment methods may lead to the restoration of the role of these organizations.


In the past, the automobile was considered to be an investment goods. Therefore customers tried to increase their assets by buying a car. With this attitude, whatever the quality, the vehicle increased client’s assets. But today Vehicle has the role of consumer goods as it is the case in all countries. For this reason, customers also tend to obtain the most profitability, so the organizations should provide maximum benefit to the customer, and the industry will be more attractive and more pleasant to the customer.

It is stated in the Aftersales Services’ topics that meeting customer’s needs creates the expectation. Therefore, customers who receive different services, obviously are not satisfied with less. Providing services causes the supplier to compete and the customer to expect. Therefore, organizations will not be going backward to provide differentiated services to for customers and identify their future needs.