09.05.16

Local report: The outlook for Iran's AV industry post sanctions

tehran, iran landscape featuring Milad Tower
Tehran, Iran

With the marketplace opening up in Iran following the lifting of UN sanctions, Charlotte Ashley spoke with key members of its audio industry to assess what the mood was in the country.

In January 2016, the P5+1 (the UN Security Council’s five permanent members - China, France, Russia, UK, USA plus Germany) announced that decades of sanctions would be lifted in a bid to allow Iran to rejoin the global economy. Nearly all of the sanctions imposed by the EU, and several major US sanctions were removed.

The lifting of sanctions could boost the country’s GDP growth from around zero to approximately 5% in 2016/17, according to the International Monetary Fund. They had previously added 15% to the cost of trading with Iran.

One of the first AV companies to officially expand in the country following new trading relations with Iran was loudspeaker manufacturer Pan Acoustics. In March the business set out to target the Iranian market with the appointment of Tehran-based distributor Rasa Pejvak Arad.

“In Iran the economic depression worsened in 2015, compared to 2014,” reflects Arash Arianfar, CEO of Rasa Pejvak Arad, which employs 11 people in the capital. “Today the first and most important thing that people consider is price. For most people, the lower the price the better. They don’t look for quality or features.”

An educational approach is necessary for Payman Abdali, sales manager of manufacturer Aimline Audio and CEO of AV Group International, who is promoting the need for their value added products in the marketplace. “We have spent time making people understand the technology, mostly because it’s hard to explain the need for beam steering. Now we are beginning to receive orders from Iran for different installations.” The company has three employees, a demo area, a recording studio and educational centre at its headquarters in Tehran.

Has the industry been affected by the lifting of sanctions? “We were facing a lot of difficulties in Iran up to the point that this political deal was signed between Iran and the West and the sanctions being lifted. All projects were either on hold, or they were not being specified to high quality products,” says Abdali. He notes that as the sanctions are not completely lifted so Iran finds itself in “a grey period” where some companies and banks are open to trading, whilst some are not yet dealing with the country.

“We were facing a lot of difficulties in Iran up to the point that this political deal was signed between Iran and the West and the sanctions being lifted.”

There has been an immediate impact on inter-country relations, however. “Surprisingly, there is an American company already here. When I spoke to American companies before, they were afraid to say hello, and now they are assigning people to take care of the business in Iran,” says Abdali, speaking about a company who has recently secured the installation at Tehran’s Mosallah Mosque, which has been at the specification stage for the last 18 months.

Both companies believe businesses will begin to feel the positive impact of the sanctions in the next six months. German-Iranian representatives are due to meet on April 26, 2016 to discuss opening the market in Iran and accepting bank payments, with eastern Europe, Argentina and other countries expected to follow.

Despite the economic situation, work is available for companies in Iran. According to Abdali, various verticals are thriving: “The safest area of the AV business is in install, because right now there are 65 major mega-malls being built in Iran, all of which need integrators, speakers and installation products. After that, it’s the live markets for music and audio. Most religious ceremonies use portable PA systems so there is a very good market for that. Then it is rental products for staging.”

Abdali states that projects often involve European companies coming to Iran and collaborating with locals for projects such as Holy Defence Museum, subcontracted to German manufacturer Macom who employed a team of Iranians and German integrators for the project. There is room for expansion however. “There are very big companies that have money working in the field, but there are not enough specialists,”states Afrooz Arianfar.

Abdali adds: “There are no major international integrators present in Iran, and I think that it’s important there are, because the market is huge, but they have to use local partners, otherwise they can’t just simply walk in and get a project. It’s very different than the UAE and those areas.

In a competitive marketplace where price points can drive sales, a loyal customer base is key to companies like Rasa Pejvak Arad and Airline Audio sustaining themselves in Iran. “For people here trust is very important. Customers prefer to work with certain companies, so we have customers that trust us,” says Arash Arianfar. “When it comes to business, of course Iranians negotiate very hard, but loyalty is there, both ways. From the distributors and manufacturers and integrators too, usually they don’t switch brands,” says Abdali.

Both companies agree that further change in legislation can boost the AV industry. “I think custom tariffs are very high in Iran, making importing goods, especially loudspeakers and other AV products very difficult,” says Arash Arianfar. Abdali comments: “The import duty is up to 200%, what some manufactures have done is actually partner up with a local company and they send the products either completely knocked down, or semi-completely knocked down, and they reassemble them in Iran. And that way they bring the import and duty tax down, maybe even to 50%.”

What advice is there for companies looking to enter market in Iran? “The AV business in Iran is much bigger than it seems from the outside. Companies should avoid just going directly through a distributor through email or from looking at a website. They have to come and investigate and get the knowledge before they enter the market, because business is there. The streets are not paved with gold, but we have the door handles made of gold, so they have to find a way to open them up.”