Volkswagen AG plans to sell cars in Iran for the first time in 17 years, taking advantage of easing sanctions to expand amid concerns about stalling growth in Europe and China.
Volkswagen has signed a contract with local importer Mammut Khodro to offer Tiguan compact SUVs and the Passat family car, mainly at dealerships in the Tehran area, VW said in a statement. Expanding into emerging economies is part of VW’s strategy to reduce its reliance on its main markets and add new sources of revenue.
“By returning to Iran, the Volkswagen brand is filling another blank spot on the global automobile map,” Anders Sundt Jensen, the company’s project manager for Iran, said in the statement.
Volkswagen is the market leader in Europe and China, and is struggling to rebuild operations in the U.S. after the diesel-cheating scandal. That leaves Iran, with a population of 80 million, as a rare opportunity for growth. Companies from Boeing Co. to Total SA are jostling for early entry to the Islamic Republic a year after international sanctions tied to its nuclear weapons program were lifted.
PSA Group was the first carmaker to re-enter with a deal announced last year to upgrade its Peugeot factory near Tehran and start building Citroen models in the country. A few months later, Renault SA said it would set up a new plant with capacity to build 150,000 autos per year.
Iran auto production growth will average 11 percent through 2021, Fitch Group’s BMI Research said in April. The return of European carmakers to the Iran market will boost the sector, although remaining U.S. sanctions will damp growth.
The German automaker’s push in Iran coincides with intensifying political tension in the Gulf region embroiling VW’s third-largest shareholder Qatar, which is facing an unprecedented boycott by four of its neighbors over alleged ties to Muslim extremists. Iran and Turkey have stepped in to support the emirate.
European cars were popular in Iran before the 1979 revolution and eight-year war with Iraq decimated the economy and strained relations with western companies. VW sold the Beetle there in the 1950s and the Bulli van in the 1960s.