Under the US sanctions .. What do you know about the auto industry in Iran?

Mohammad Rehmanpour-Tehran

Iran's auto industry is the third largest after oil, gas and petrochemicals, accounting for 10% of the GNP, and employs about 855,000 employees.

Iran currently ranks 20th in the list of the most productive countries in the region and second in the region after Turkey, after it was ranked 12th in the world and first in the region in 2017, according to the website of the International Organization of Car Manufacturers (OICA).

Iran produces more than one million cars annually, and its production capacity for 2017 reached 1.534 million cars, in addition to buses and trucks.

Due to U.S. sanctions on Iran, car production fell in 2018 to 955,000. But this year production is expected to rise to 1 million.

First car
Under a license from the British company Talbot, Iran made its first Peykan in 1967 at Iran National, or what is now Iran Khodro. In the same year, it also produced passenger buses and trucks.

To date, Iran Khodro is one of the largest car manufacturers along with Saipa, which produces about 90% of all cars in the country. The country owns between 14 and 16% of the shares of the two companies.

There are also many car manufacturers in Iran, including Pars Khodro, Kerman Motor, Zamyad, Bahman and two Khodro managers.

Withdrawals
The auto sector suffers from several problems, such as high prices of raw materials, low production, declining quality and lack of development of models, especially recently after the renewal of US sanctions on the sector and the withdrawal of major foreign companies such as "Peugeot, Renault, Mazda, Hyundai" from the country.

US sanctions have also stopped or reduced the export of Iranian cars to countries in the region such as Russia, Ukraine, Turkmenistan, Kazakhstan, Mauritania and Lebanon.

However, Iran has domestic plants in countries such as Iraq, Syria, Azerbaijan, Venezuela, Belarus and Senegal.

Mohammad Hassan Shujai Fard, dean of the Faculty of Automotive Engineering at Iran University of Science and Technology, says the automotive sector suffers from a lack of its own strategy.

There are also large companies and a window in the spare parts industry does not allow to change or develop car models, because they have to develop their mechanisms that have been operating for decades.

Said Saeed Laylaz, an economist and an expert in the automotive sector, told Al Jazeera Net that "the auto sector in Iran faces four challenges" the first of which is political and diplomatic.

The second challenge is the US sanctions that have caused a lack of cooperation with large companies and the transfer of advanced technology to the country, as well as the difficulty of importing raw materials in the automotive industry, although 30 to 80% of the parts of the car is manufactured in the country according to each model.

The third challenge, Leylaz says, is ownership, as the state owns part of the sector and does not have the flexibility and efficiency of the private sector. The final challenge is the country's working environment, administrative routine and banking system.

Low quality
Iranians complain about low quality and exorbitant car prices, especially after sanctions have returned and the local currency has depreciated against foreign exchange. Many citizens have resorted to buying housing, a car or foreign currency to save their purchasing value.

Therefore, the car market was affected after people rushed to buy local cars, which led to higher prices compared to last year between 70 and 135% according to models, in addition to the high prices of raw materials for the production of the car.

For example, PRIDE, the cheapest car in Iran, is currently priced at $ 3,750, up from $ 1,750 in June last year. The average salary of a government employee is $ 238 a month.

Imported cars
As for imported cars, the state has closed its car registration site this year. It does not currently allow foreigners to enter the country in order to preserve funds inside the country as well as protect nationalism, which has led to a rise in the price of foreign cars on the market.

Previously all customs taxes imposed on the entry of a foreign car ranged between 100 and 150% of the price of the car in international markets and abroad.

Five decades have passed since the first car industry in Iran, and this sector continues to swing on the waves of political turmoil and crises facing the country. Does this sector reach the coast of safety or is it approaching day by day the clutches of political whales?