Volkswagen Taps into Iranian Market

Press Release

Production under license in the Bam region to start this year

The Wolfsburg-based carmaker, Volkswagen is implementing plans to develop business on the market in Iran. A production plant is due to be set up by the end of this year in the Special Economic Zone Arg-e-Jadid near the city of Bam, which will assemble over 20 000 vehicles per year. A license agreement for the project was signed on Friday by Dr Folker Weißgerber, Member of the Volkswagen AG Board of Management, Detlef Wittig, Member of the Volkswagen Brand Board of Management for Sales and representatives of Kerman Automotive Industries Co..

Volkswagen will initially launch the Gol 1.8l four-door version (Comfortline) on the Iranian market. The CKD kits (completely knocked down) will be delivered from Brazil for assembly in Iran. If business develops successfully, local manufacturing could be set up within a few years. Other Volkswagen models may also be added in the coming years, depending on development of the car market.

The cars will be assembled by BAMCO, a subsidiary of Kerman Automotive Industries Co.. They will be sold throughout Iran by an exclusive dealer network owned by Modiran Pars Co., also a Kerman subsidiary. This means that there will be initially over 70 dealers located primarily in Iran's urban centres ready to sell the Gol.

Speaking in Arg-e-Jadid, Dr Weißgerber stressed that Volkswagen's uniform quality standard along the entire process chain will ensure that the Gols assembled in Iran are also "vehicles made by Volkswagen". He commented that, as in all other markets in the world, the aim of Volkswagen AG was to satisfy its customers.

At the signing of the agreement Mr Wittig said that Iran had played a major role in the Group's strategic considerations for some time. "We are pleased to have a strong partner in the form of Kerman with whom to develop our operations on the fast-growing Iranian market." He said, Volkswagen had put considerable effort into its search for a partner for production in Iran. The decisive reason for partnering up with Kerman and BAMCO was in the final analysis the nature of the companies' as privately operating businesses with a clear market orientation which fitted Volkswagen best. Also both companies came up to Volkswagen's high quality standards.

Volkswagen already sells the Gol successfully on many other markets, such as Argentina, China, South Africa and eastern Europe. In Mexico it was the highest-selling vehicle in its segment in January 2004.

Volkswagen believes that the Iranian motor vehicle market has great potential for growth. In recent years the automotive industry grew at a much greater pace than the country's industry as a whole. Between 1999 and 2003 the Iranian car market grew by 147 percent.

There is currently a high demand for vehicles in Iran. Estimates indicate a current requirement for some one million vehicles, which currently cannot be met due to a lack of capacity in the country's closed car market. There is also the fact that over half the vehicle population in Iran is over 25 years old. The country's vehicle density is relatively low at 55 cars per 1000 people.

BAMCO was founded in the Arg-e-Jadid Special Economic Zone near Bam in 1994 and currently employs some 800 people. CKD production of the Gol will start before the end of this year and will meet all Volkswagen quality standards.