Automakers eye next huge market: Iraq

While many have been extolling the huge market potential forautos in China, a few automakers have set their sights in what is quicklybecoming the fastest growing market for autos in the world – Iraq. This is certainly good news for all of the OEM manufacturers for AC compressors and air conditioning parts. They havethe fifth-largest oil reserves in the world, and a population bigger than SaudiArabia’s. Western vehicles were banned while Saddam Hussein was in power, butwith that issue taken care of, VW GM and Ford have flooded in to providevehicles for an expanding market.

 Rising incomes and declining violence are the main factorsaffecting this huge change in lifestyle for Iraqis. Although things are betterthan they were six years go, 1500 people were killed last year because ofbombs, sniper ambushes, and other related violence. That is shocking, butcompared to the 34,500 death toll in 2006, the improvement is felt in thequality of daily life for Iraqi citizens.

Iraq’s economy is set to grow by over 10% this year as oilrevenues and foreign investment boost the economy. Minimum wage has risen from$2.60 a month during Saddam Hussein to $400 a month now. Rising incomescombined with a population of more than 30 million people create a veryattractive potential market for automakers.

Underpass in Baghdad

 There are still many hurdles to overcome before Iraq’smarket potential can be realized however. Poverty and violence still persist.Iraq’s economy will probably grow to the equivalent of $3528 per person thisyear; compare this with Saudia Arabia’s $20214 per year and you understand howfar Iraq still has to go. Unemployment is an alarming 40%, four timeshigher than the official report of 11% according to the World Bank.

Even so, things are definitely looking up and automakers aretrying to get in on the ground floor. As Iraq’s economy continues to rise VW,GM, and Ford will be poised to take advantage of a growing middle class inIraq.

Source: Bloomberg