GB Auto has decided to discontinue its passenger cars representation of Hyundai in Iraq amid the changes of the latter’s new policy of multi-distributor model strategy in the Iraqi market. GB Auto believes that such a business model never yields proper return given the investment required to achieve sustainable automotive operations.
Management decided also to continue operations until it completely liquidates all the remaining inventory and pipeline, which could last up until mid-2020.
In the meantime, management is seeking new representation of passenger car brands in the Iraq market.
In the past few years, GB Auto has managed to represent and strengthen Hyundai’s footprint in Iraq, which was tangible in 2019’s brand market share that approximately hit 25% for the year. Achieving such a milestone required a lot of overhead, strong capital injection, high investments, and expertise. GB Auto’s management took such a decision after careful studying of the matter at hand, as the new business model required from the original equipment manufacturer is not feasible, especially with a division with slim gross margins varying between 5-6%, operation won’t be yielding enough to cover its cost of capital. It is also worth noting, that this division lead to losses on net profit in 2015, 2016, and 2017, and broke even in 2018 and 2019.