Russia's AvtoVAZ to start exporting Lada cars to Iran in 2024

Russia's AvtoVAZ to start exporting Lada cars to Iran in 2024
Russia's automotive sector has collapsed following the imposition of sanctions that cut it off from essential parts imported from Europe. Iran has been under sanctions for years and is now stepping in to help Russia revive its stalled car production. / bne IntelliNews
By bne Tehran bureau April 17, 2024

Russian carmaker AvtoVAZ is set to return to the Iranian market after a 25-year hiatus, the company’s president, Maxim Sokolov said to Moscow-based news agency TASS on April 16.

Russia’s war has seen hundreds of foreign companies leave the country, but no sector has been harder hit than the automotive. AvtoVaz, maker of the Lada, has seen its production come to a virtual standstill as the company, formerly run by Renault until its exit following the invasion of Ukraine, set up a “spoke and wheel” model that means most of the more sophisticated parts were imported from Western Europe. Those imports have stopped now and the company has few alternative options to replace them.

The CEO promised the company plans to enter the Iranian market and to sell models locally this year as part of a growing relationship with its Iranian counterpart, SAIPA with the Mark-I Dacia Logan model. Sokolov added that the company will follow its previous plans and does not intend to change selling plans to Iran despite the “worsening situation in the Middle East.”

"We do not change [our plans], because any escalations pass...The infrastructure for sales [in Iran] is already prepared. We will begin deliveries and sales within this year," said the head of the company.

Sokolov didn't reveal the exact sales volume AvtoVAZ anticipates for the Iranian market, which is primarily dominated by local car companies Iran Khodro Co (IKCO) and Saipa (previously a French joint venture). He added that considering the Iranian market sold over 1mn cars last year, the company sees it as a very promising market for its low-cost vehicles. Not by coincidence, Saipa and IKCO sold over 1.02mn cars during the last Persian calendar year (March 2023-24). Chinese car companies were the closest foreign brands in the market. However, their market share was minuscule despite complete-knock kits being assembled in the country to reduce the tax burden on companies like Chery.

In December 2023, Sokolov announced that the company is considering selling Lada car models in Iran as CBU (Completely Built Units), which are complete cars that do not require assembly, as reported by the news portal of the Iran Embassy to Russia in Moscow.

The Lada cars were publicly unveiled in Iran during the second Eurasia Expo in December 2023, and the import will be handled by a company named Nika Motors. However, the company has not yet announced the registration and supply timeline for the Russian Lada cars in Iran.

When faced with a situation similar to Iran's, Russia sought assistance from Iran, as it is the largest automaker in the Middle East. The country began exporting a small number of cars to Russia. However, Iran has a reputation for producing low-quality cars, and some Russian experts have objected to the import of these cars due to their poor quality. The CEO of Best Motors LLC, Alexander Stepanov, earlier announced that the company will not import Saipa car models as they are no longer economically viable, and Saipa’s sales plans in the country got cancelled, as reported by Novaya Gazeta. SAIPA, was 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 in February 2023.

More than a decade ago, 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 the 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 regarding 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. 

Between IKCO and SAIPA, the two companies have more than 85% of the Iranian domestic automotive market, with the third biggest producer, Chinese JV, Maadiran Vehicle Manufacturing (MVM) following with 6%.