Barez: An Iranian success story
By Sharad Matade
Barez Industrial Group, Iran’s largest tyre manufacturer, is celebrating three decades in business. The company grew despite the Iraq-imposed war and a slew of debilitating economic sanctions. “Frankly speaking, what I had in mind for Barez was beyond what we have achieved,” says Abbas Abbasi Abyaneh, CEO, Barez Industrial Group. Elaborating on his vision for the company, he told Tyre Asia in an interview that the success his company achieved in the shadow of several adverse economic conditions that the country went through was due to its intense focus on the customer needs
Eight years of Iraq War imposed troubles for Iran and the painful economic sanctions spread over three decades did not deter the entrepreneurial spirit of Abbas Abbasi Abyaneh, CEO of Barez Industrial Group, Iran’s largest tyre manufacturer. “Of course I must be thankful to God for what we have accomplished,” he told Tyre Asia in an interview. “In all those difficult years, the company kept its business practice simple and focused on consumers’ needs.”
Abbasi Abyaneh asserts that in such times of economic turmoil and uncertainty, enterprises can survive only if they dedicate themselves to meet the market demand. “It has been my belief for all these turbulent years that any economic entity can hope to survive such situations only if it takes into consideration the market requirements and its customer needs.”
Keeping this basic principle in mind, Barez became the pioneer in the production and supply of both passenger radial and all steel truck/bus radial tyres in the Iranian market. It was totally dedicated to ensure product quality and took up careful expansion plans. It increased the annual production capacity to almost 90,000 tonnes or 4.5 million tyres per year.
“It is evident that to respond to the customer requirements, any company should equip itself with the required resources, especially an innovative team composed of highly motivated and skilled human resources. In my opinion this is the cornerstone of all progress and achievements that a company can achieve. Fortunately, we in Barez have many such talents,” says Abbasi Abyaneh.
When Barez Industrial Group launched its operations, it was described as an historical occasion. Before the Islamic Revolution, the country was producing tyres through joint ventures with foreign partners. Barez built its first plant with no experience in designing and construction, he recalled.
To overcome the lack of experience in the design and construction of the factory, Abbasi Abyaneh formed a core team of different specialists and technical people in the tyre business. “We used to have weekly meetings in which we discussed many design-related subjects and reviewed equipment selection for the new plant.”
He was tasked to define the subject focus of the meetings and assigned groups of specialists to prepare project reports. The company started its first plant with the bias technology which was bought from one of the existing factories.
Anticipating the trend in international and domestic markets, it bought radial tyre technology from the German tyre giant Continental. “I should add that in designing tyres, we have had good progress and gradually we were getting required experience indigenously.”
After that, Barez launched three more production lines that were designed and constructed locally, he says. Following the lifting of international sanctions, Barez is planning for further expansion.
It has already begun work to put up a manufacturing plant in Kurdistan region that will add 50,000 tonnes to its current capacity of 90,000 tonnes. With all this capacity expansion, it aims at an annual production of 130,000 tonnes, or 10 million tyres per year, by 2021. By 2025, it plans to export 25 per cent of its combined production.
Iran is located in a region with a huge potential market. Barez has selected 11 target regions where it aims to sell a total at 220 million units. Tyre production in this region is not more than 150 million units and it hopes to meet the balance requirement through imports.
“Barez has devised a comprehensive plan to penetrate these markets and it is planning to expand its production and scale up its exports to these markets,” says Abbasi Abyaneh.
In Iran, most of tyre companies that are pre-Revolution enterprises began operations with borrowed technologies. They still run on the same old technologies. Not many innovations are also happening in the tyre sector. “Innovation in any area, including product development and new technologies, requires advanced development centres. To establish this kind of centres, a company should have a minimum scale of production to justify the huge cost of setting up these centres,” he said.
Knowing the need to have its own R&D centre to compete with international peers, parallel to its expansion of production, Barez has started R&D centres with modern equipment and technical workforce.
“In addition, we have recently inaugurated our own tyre test field which we hope would contribute to push further our product development efforts,” says Abbasi Abyaneh.
After the lifting of economic sanctions, many global tyre companies are planning to enter the Iranian market. Major tyre producers are either in discussions with local tyre firms or evaluating market penetration strategies, according to informed industry sources.
Having strong financial and technology support, these international tyre giants will pose tough competition to domestic producers. Before this happens, industry policies are needed to be brought in to protect local tyre companies.
The Iranian market in recent years has been open to tyre imports from all over the world. “We are already facing severe competition. To make matters worse, the custom tariff for imported tyres is rather very low; for passenger tyres it is 30 per cent and for truck tyres it is 20 per cent.”
Apart from legal imports, Iran is also reported to have large unlawful tyre imports. Under such circumstance, the domestic manufacturers are facing severe challenges. “But having focused on customer services, we have scored some great success,” says Abbasi Abyaneh.
Apart from continuous product improvement and consumer-oriented marketing strategies, Barez is also focusing on spreading sales and service and distribution networks.
“From establishing strict product quality assurance systems in our plants, we have acquired the rights to set up three regional sales centres. We are also planning to add another two centres in coming months,” he says.
Barez has assured customers of product availability and set up more than 300 selling agents located all over the country. Moreover, it is offering a three-year guarantee on all its products.
In recent times, major international companies are racing to acquire online tyre selling portals as they anticipate tremendous future growth in this segment. However, tyre online selling in India is not priority for Barez at least for the time being.
In Iran, although online selling by both B2B and B2C has been welcomed, in tyre business it has not yet been accepted very widely. “Of course, we in Barez have already started B2B selling with our agents and recently launched a plan for B2C business though our distributing company, Saman Barez,” says Abbasi Abyaneh.
Import of tyres from China is a major threat to domestic tyre companies. Around 30 per cent of Iran’s tyre demand is being met through imports. Tyre imports has surged in recent years and its average amount has been 100,000 tonnes. Imported Chinese tyres are cheaper than the locally produced tyres.
“I should say, it is not only tyre imports from China that have adversely affected Iranian producers, but there are other issues as well. Many products are imported from China causing problems for the Iranian producers. The problem is not only with Chinese exporters. Some part of the problem is stemming from the Iranian regulations,” he emphasises.
In the last couple of months, the conditions for tyre imports have been tightened and quality restrictions have been imposed on them. “Still tyre import tariffs are low, and domestic manufacturers are under great pressure,” explains Abbasi Abyaneh.
Both the Iranian and international markets are opening up for each other amid trade liberalisation measures. However, Barez does not have any plan to enter other markets through organic or inorganic route.
“In Barez, up to now, we have been concentrating on our own resources to grow our business. For the time being, I do not think of any change, although it depends on our main shareholders and future Iran’s business environment,” he says.
Iran imports almost five to six million units of tyres, and Barez’s target regional market holds a potential 70 million tonnes. “Therefore, we find that there is a good opportunity for both local and foreign companies to invest in Iran’s tyre industry, he added.
“Iran enjoys many competitive advantages, including a huge reservoir of low paid skilled workforces, low cost energy, tax exemption etc that altogether make investments in the tyre sector more attractive,” Abbasi Abyaneh said.