ANALYSIS: Iran nuke deal may bode well for tire industry

By Shahrzad Pourriahi, Crain News Service

LONDON (July 22, 2015) — A nuclear agreement between Iran and the West has been welcomed by some industry leaders and could be good news for the tire industry in the Persian Gulf state.

The deal, recently struck in Vienna between an Iranian negotiating team and a team of diplomats from the U.S., England, France, Russia, China and Germany, is aimed at preventing the Islamic republic from building a nuclear weapon in return for the lifting of sanctions that have isolated the country and hurt its economy.

The removal of sanctions could lead to a rapid revival for the country's oil and gas industry as well as within its once-booming automotive sector.

According to Hooman Tootoonchi, Iranian tire industry expert and head of research and development at the country's Pars Tire Co., Iran's tire sector is set for accelerated growth over the next 10 years, given the combination of cheap and readily available oil and a growing population hungry for mobility.

“Our country's need for tires is currently 330,000 tons (a year), of which 230,000 tons are supplied by internal companies and 100,000 tons supplied through imports,” according to Mr. Tootoonchi.

It is predicted that Iran's demand for tires will reach 800,000 tons in 2025, noted Mr. Tootoonchi, adding that demand will require new investments in this industry.

He estimated that by 2025, there will be a ratio of 300 cars to 1,000 persons, meaning that car production will have to reach 1,650,000 units per year.

The growing Iranian market, however, has been rather closed to foreign players, with Chinese tire makers slowly finding their way in.

Iran's tire imports increased by 23 percent during the years 2006-10, with China as one of the top exporters to the country.

“Now the share of Chinese brands in Iran's tire market is about 30 percent for light tires and 60 percent for heavy tires,” according to Khosrow Mahmoudian, the secretary of Iran's Tire Association,.

Speaking at the 12th Iranian Tire Industry Conference in February, Mr. Mahmoudian said the import of passenger tires jumped by 151 percent in the first three quarters of the year ending March 20, 2015, adding that most of the imports were from China.

Iran's domestic tire production only grew 15 percent during the same period.

Nearly a decade of sanctions and lack of investment in research will mean Iran is likely to open its doors to quality brands to bring some technology home.

Mr. Tootoonchi said he believes the Iranian tire industry can be bolstered by a young work force and a strong supply of raw materials locally.

“Iran is a big country, and its main means of transport is roads. At least about 50 percent of raw materials is supplied internally and there is a proper connection between tire sector and its upstream and downstream industries,” Mr. Tootoonchi added.

As an active market for production and sales of cars and due to its low costs and proximity to the Middle Eastern market, he concluded that Iran can be an ideal place for new investments,.

This report appeared in European Rubber Journal, a London-based sister publication of Tire Business.