Iran signs breakthrough deal to export 45,000 cars to Russia

Iran signs breakthrough deal to export 45,000 cars to Russia
Deal in motion. / Iranian Trade Development Organisation
By bne correspondent in Tehran February 23, 2023

Iran’s second largest automaker by volume, SAIPA, is set to arrive on the Russian market following  the signing of a breakthrough agreement for the export of 45,000 of its vehicles to Russia over the next Persian year (March 21), Tejarat Online reported on February 22.

Iran has been stating for months that it wants to mop up the bottom end of the Russian car market following the exodus of European and Japanese brands from Russia amid the economic backlash against the country in the wake of the Ukraine invasion. However, SAIPA faces stiff competition from low-cost Chinese imports and local carmaker AvtoVaz, the producer of Lada vehicles, who both offer cars at the same price point. Built on the backs of localised foreign platforms, Iranian cars have, meanwhile, never been tested in harsh Russian winter conditions.  

With the conclusion of the export contract—drawn up in line with understandings reached at the 2022 Moscow Automobility Exhibition as Russia and Iran boosted political and a range of economic ties—45,000 vehicles manufactured by SAIPA will be exported to Russia in several shipments. They will have a total value of $450mn.

The deal to export the models was signed with Russia’s BM Group, renowned for its production of Russian military equipment.

Vehicles included as part of the deal are of the Shahin, Kwik and Saina models, all built from the same platform, derived in Iran from imported systems.

SAIPA has enjoyed success in recent years with the creation of several models built from the same platform, with two further models to be released including a new small hatchback model and a crossover.

Alireza Peyman Pak, head of Iran's Trade Development Organisation, was cited by Tejarat Online as saying: "The turnover of the automobile sector in Russia is more than $20bn and we can get a good share of this market after the departure of their main partners due to [Ukraine war] sanctions."

Mohammad Ali Temouri, CEO of SAIPA, said: "Our partners in Russia are two major car manufacturers of the country that have closed due to sanctions, and SAIPA Group is ready to send its engineering and technical team to Russia to update their production lines and make things possible. We'll provide car production and supply in the Russian market."

SAIPA is already in a deal with AvtoVAZ for the production of the mark-I Dacia Logan. It is being rebranded by both SAIPA and Russia for local production.

SAIPA’s main competitor in Iran, Iranian number one automaker Iran Khodro (IKCO), exported some of its vehicles to the Russian market between 2007 and 2009, but things did not work out. Only a few IKCO cars remain on Russia’s roads. Some buyers of IKCO models complained that Iranian cars could not handle cold Russian winters. There were also objections to poor-quality parts.

IKCO sold cars in Russia that were based on old Peugeots—for example, the Samand model, which is essentially nothing more than a Peugeot 405 from the 1980s.

By the end of the 2000s, the Samand was seen in Russia as outdated. The country was busy actively developing the production of Western, Korean and Japanese brands that offered more interesting models.

Since then, IKCO has taken a step forward in terms of its range of cars. They include a recently released small crossover model, the Rira, based on a Groupe Peugeot Societe Anonyme (Groupe PSA) platform from 2017.