Porsche; the elitist symbol of uptown Tehran.

I am writing this article as there exists a rumour in Iran that, in 2012, half of Porsche’s global sales were made to Iran. The rumour is, alas, just a myth. Maybe hubris in response to tougher sanctions? A bit of bravado to express that things are just fine? Whatever it is, let’s explore this non-story a bit as it is telling of a few things in sanctions-era Iran. And it lets me use the word Porsche a lot.

In April 2012, it was widely reported (including, for example, on Top Speed) that Porsche were closing their doors in Iran as a result of the complexity of doing business in Iran under sanctions. A lot of European firms have gone the same way. They are not directly frozen out by sanctions, but afraid that their banking with clients in Iran will get caught in the wide surveillance array of the United States, and they will suffer from some kind of fallout.

And so, in early 2012, Porsche’s head office announced it was closing its doors in Iran.

The funny thing about this story, though, even though it made such headlines, is that it is such a non-story. Porsche did not stop doing business in Iran at all; they have never done better.

Remarkably, though, or perhaps not so remarkable since it was probably – as Lord Blackadder once said – a cunning plan devised by someone with a Masters degree in Cunning (yes, yes, from the University of Cunning) working for a media consultancy, the story really got some traction. In a quick sample, about 90% of the Top 40 Google responses to a query about “Porsche” and “Iran” are about Porsche’s cessation of sales to Iran. Happily for Porsche’s position on sanctions, that headline has really stuck.

And yet, after ceasing sales, Porsche sales to Iran have not been better according to any number of sources. What has changed, however, is that the sales have not been direct sales from Germany to dealers in Iran. The cars now come from Dubai, and Kuwait. This is possible because, remember, there is no end-user certification required for international car sales, so international brands effectively launder sales to Iran by selling through dealers elsewhere. The only real change is that a little % goes into some middle-person’s hands. And hard currency from Iran goes to Stuttgart via Dubai, instead of directly into Germany.

The net impact of the ‘closing’ of Porsche sales to Iran:
1) Porsche dealers and importers probably asks at least 20% more from buyers in Iran than they could before;
2) Middle-people in the Gulf take an additional % in sales that were formerly direct; and
3) Porsche now sells more cars than ever in Iran.

Take a spin around northern Tehran, and it is unlikely you will ever see more Porsche Panamera’s in one place. Sales are clearly, openly, ostentatiously, good.

porsche-panamera-1 Porsche-Cayenne-Turbo-S-LA-Auto-Show

The reasons sales are so good, are not perfectly clear. They are damned expensive, for a start. But perhaps that makes them more worth having for those with extra hard currency but no other way of showing it off? Part of making a luxury brand in any market is, surely, about the product being so stupendously expensive, 99.9% of the population can only dream of having one.

Partly, it is also because of the ‘lazy’ wealth being accrued by the connected elite in Iran; sanctions are not biting everyone. If there is one group in Iran NOT hurt by sanctions, and enriched merely by entitlement, it is the rich/elite/connected 0.1%. With throttled import markets, a small number in the society earn big from sanctions. With few foreign investment options thanks to sanctions, domestic investment takes precedence and property construction and luxury car sales boom. I am guessing, with the several Rolex outlets in town, that car-makers like Porsche are not the only luxury brands singing happy Persian ditties.

The irony of the sanctions – and please repeat this to anyone who is a proponent of sanctions – is that those who are meant to be displaced by them, those with money, influence, and power, are merely reinforced and enriched by them.

So the reasons sales are booming, like most things in this society, are complex. Maybe it is also a bit about the scarcity itself; having officially ceased sales makes the product even more attractive? Or the glamour attached to having a car that is so obviously splashy, pretentious, wealth? In a country like Iran, having a Porsche says many things about the owner. It not only says they are rich. It also shows they are so insanely rich, that the enormous costs and difficulties of servicing, repairs, and spare parts are not the problem they might be for someone of less superior means. It also says they are connected, or ‘made’ in the Goodfellas kind of way; you don’t get so seriously rich in sanctions-era Iran without serious backing, and paying through the nose for your position of privilege.

And so, anyway, this article was meant to be about myth-busting. Back to the rumour about Porsche car sales in Iran accounting for half of Porsche’s annual sales.

Globally, Porsche enjoyed a banner year in 2012, posting a new global sales record of 141,075 units. Triangulating from the numerous sources brings us to an estimate of around 800.14 Porsche’s sold in Iran in 2012. The 0.14 is my addition, for the piece of Porsche bumper I found lying in a nearby street after running into a Toyota Landcruiser.

Well, the stray bumper aside, you can do the math.

Myth – you’re busted! 🙂

Although not 50% of global sales, 800 cars a year is nothing to be sneezed at. It is about 5 times the number of Porsche’s sold in the more-populous India each year. But, to maintain perspective, at 800 units a year it is also not like everyone in Iran drives one. However many Porsche’s are sold in Iran, luxury imported cars remain a minority of car sales in Iran. About 1.5 million cars are sold in Iran each year, with about 200,000 imported, depending on which sources you read and believe. So these elite cars are, like everywhere else, for the 0.1%ers.

And just to satisfy vulgar curiosity, how much privilege does a Porsche in Iran signal? Prices of Porsches are steep, without doubt. Although I’m not any kind of expert in Porsche retail prices, I think it is fair to say they are perhaps more expensive here than anywhere else in the world. There is, for a start, a 100% import tax on luxury cars. As to specifics, a standard Porsche Panamera S, for example, sells for 400,000 USD, or a Boxster for 130,000 USD.

And this in a country with average monthly earnings of 700 USD.

So, for each of those sleek-looking Panemera owners in uptown Tehran, wearing (it screams out to be observed) rather self-indulgent shiny suits, let’s count nearly half a million dollars to slide your butt into that hand-groomed leather seat. Considering the view from my 1 USD taxi seat – without even the hint of basics such as a seat-belt – that’s seriously privileged butt. 🙂

Confronted with inflation of over 20%, an estimated unemployment rate of up to 25%, a currency severely weakened, and international sanctions, the connected rich and elite of Iran are now buying Porsche’s at an unprecedented rate, and that is not going to let up until less-elite types can afford them. After all, nothing inhibits the ardour of the elite for buying anything faster than seeing plebeians buying it.

Anyone want to make sure the elite in Iran stays all-powerful, cashed up, and driving top-end European vehicles? Sanctions will likely do it.