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Automotive industry in Iran

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Iran's automobile production crossed the 1 million mark in 2005. Iran Khodro is the largest car manufacturer in the Middle-East. It has established joint-ventures with foreign partners on 4 continents.

Iran’s automotive industry is the second most active industry of the country, after its oil and gas industry.[1] Today, Iran is the 12th largest automaker in the world and the largest in the Middle-East, with the total production of 1,395,421 cars, including 35,901 commercial vehicles.[2] In 2009 Iran ranked fifth in car production growth standing next to China, Taiwan, Romania and India.[3]

As of 2001, there were 13 public and privately owned automakers in Iran, of which two - Iran Khodro and Saipa - accounted for 94% of the total domestic production. Iran Khodro, which produced the most prevalent car brand in the country - the Paykan, which has been replaced in 2005 by the Samand -, was still the larger with 61% of the market in 2001, while Saipa contributed 33% of Iran’s total production in the same year.[4]

The Iranian manufacturers currently produce six different types of vehicle, including passenger cars, 4WD, trucks, buses, minibuses, and pickup trucks. The sector directly employs about 500,000 people (roughly 2.3% of the workforce), and many more in related industries. About 75% of local output is passenger cars, with pick-ups the next largest category, accounting for around 15%.[5]

Historical development

See also: Economy of Iran and Automotive industry

In the 60's, lacking the technical know-how and unable to produce its own automobiles, Iran invited western firms in order to start a domestic automobile industry. Since then, Iran has developed its domestic industry where it can design and assemble cars on its own, including a new car factory in Kashan. The 6 development phases of Iran’s automotive industry have been:[6]

1. Assembly with western assistance 1969–1989
2. Spare Parts Industry Development 1990 – Present
3. Auto Design 1975 – Present
4. Mass Production 1975 – Present
5. Establishing Export Bases 2006[7][8] – Present
6. Mass Auto Export 2008[9] – Present

Market and domestic production

See also: Demography of Iran and Privatization in Iran
File:Runna.jpg
Runna is the third Iran-made car. Features include airbags, antilock brakes, power steering and power windows.

In 2008, IDRO reported that SAIPA accounts for 54 percent and Iran Khodro for 46 percent of the output.[10] Although carmakers are listed on the stock exchange, the government still owns about 40 percent of both companies.[11] In July 2010, the government sold a further 18% stake in both Iran Khodro and Saipa for about $2 billion in total, bringing down its participation in both companies to about 20%.[12][13] In August, both deals were cancelled by the Iranian Privatization Organization. No clear reason was given for the cancellation of the deals, but analysts believe that discontent over the prices at which the blocks were traded is the most likely reason.[14]

The other car manufacturers, such as the Bahman Group, Rakhsh Khodro, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%. These automakers produce a wide range of automobiles including motorbikes, passenger cars, vans, mini trucks, medium sized trucks, heavy duty trucks, minibuses, large size buses and other heavy automobiles used in commercial and private activities in the country. Iran Khodro Diesel has a dominant market share (+70%) in bus, truck and van production.[1]

Iran with having a fleet of 7 million passenger cars, buses and trucks ranked the world’s 16th biggest automaker and largest in the Middle East in 2006 with annual production above 1 million units and 1.3 million in 2009,[15] resulting in almost 1.5 percent of total world production of vehicles and 1 car per 10 person.[5] By 2010 Iran's fleet reached 11.5 million cars.[16][17]

Sixty percent of passenger cars produced in 2008 will use natural gas as fuel or will be dual-fuel, and the remaining 40 percent will run on regular gasoline (2008). Some problems faced by the industry are slow deliveries of cars, lack of after sales services and low quality in the production of some cars.[18] Car production in Iran has increased 445% between 1998 and 2008.[1]

More than half of the vehicles in Iran are over 25 years old (2007).[17] The government has sought to upgrade the local fleet and the authorities aim to pull some 200,000 outmoded vehicles off the road each year, underpinning demand.[5] According to estimates the demand stood at 1.5 million vehicles in 2007, which could not be met by the local producers.[19] Auto manufacturing industry's share in gross national product is two percent and Iran's auto production rate in the global markets is 1.7 percent (2008).[20]

Motorcycles

There are 7 million motorcycles in Iran and 1,500 motorcycles receive number plate each day. Motorcycles account for 30% of air pollution in Tehran.[21] Domestically manufactured motorcycles conform to Euro 2 standard and they don't even use catalyst transducers while the world has now considered Euro 5 standard for motorcycles.[21]

Exports

In 2007 Irans car exports stood at around $500 million.[22] Iran car exports are projected to reach $1 billion by March 2009.[23] Overall production is expected to rise to 1.13 million units by 2012 ($200 million in exports expected by 2010) and 60,000 units exported by 2013.[24][25]

Auto parts

See also: IDRO's automotive subsidiaries and List of Iranian companies
IKCO EF engines are four cylinders engines. The EF7 series are designed jointly by Iran Khodro Powertrain Company (IPCO) and F.E.V GmbH of Germany.

Sapco and Sazegostar are the respective purchasing arms of Iran Khodro and Saipa (the two largest Iranian auto manufacturers).[26] The Iranian automotive parts industry consists of approximately 1200 companies (15,000 factories), which include those affiliated to vehicle manufacturers as well as independent firms. The industry consists of two primary sectors: Original Equipment Manufacturing (OEM) suppliers, which produce parts for auto makers, and After-Market Parts Manufacturers (AMPM), which produce replacement parts for vehicles.[27] Over 39 countries purchase Iranian auto parts (2008).[5][28]

R&D

See also: Science and technology in Iran

There are different ongoing R&D projects both at the governmental and private sectors. These projects research are mostly aimed at local market of Iran and its particular problems. New lines of locally designed and manufactured diesel, gasoline and dedicated CNG engines are being developed. There are also some research being done on hybrid and electric vehicles for the future Iranian market. In addition to this nanotechnology is being researched for introduction into production lines in order to improve the quality standards and customer satisfaction by offering anti-bacterial seats, anti-scratch paint, hydrophobic glass panes, maintenance-free air filters, anti-stain dashboards, nano-catalytic converters and nano-diamond containing lubricating oils.[29][30]

Foreign direct investment and imports

See also: Foreign Direct Investment in Iran
Mercedes-Benz E Class is produced in Iran by Iran Khodro

There are over 25 automakers in Iran, actively producing both light and heavy vehicles. These automakers are in joint venture with several popular international automakers such as Peugeot, Citroen (France), Volkswagen (Germany), Nissan (Japan), Toyota (Japan), Kia Motors (South Korea), Proton (Malaysia), Chery (China) and many other established producers of light and heavy vehicles such as Renault (France), B.M.W, Mercedes Benz (Germany) and Daewoo and Hyundai (South Korea) have emerged since 1991.[5][17][27] Italian carmaker Fiat has also announced of plans to begin production of its Siena sedan in Iran in 2008.[24]

Chery Automobile (China) in August 2007 entered into a US$370m joint venture with Iran Khodro, Iran to produce cars for the Middle East. Chery Automobile is to hold 30% of the venture, and Khodro will hold 49%. Solitac, a Canadian front company, is to hold the remaining 21% of the venture. The factory will be in the Iranian city of Babol.[31] Anhui Ankai Automobile (also of China) signed a deal in January 2008 with ARG-Diesel Iran to supply it with 600 buses, valued at €51.35m. The deal is to be complete by October 2008.[31]

Iran annually needs some 4,000 buses for its domestic transportation. Since the 1970s, Iran has been producing a number of different buses, such as German Mercedes and MAN as well as Swedish Scania and Volvo that it has exported throughout the Middle East.[32] Daewoo Bus Corp. and an Iranian automaker Ardebil Sabalan Khodrow-Maywan have teamed up to build buses in Iran. The plant, which is slated to be completed by March 2010, would have a production capacity of 2,000 buses per year and would produce some 800 city and intercity buses in the 18 months after its inauguration. Based on the agreement, the engines and gearboxes would be manufactured in South Korea. But production would increasingly shift to Iran, where about 60 percent of the parts would be made.[32]

Imports

See also: Import tarrifs in Iran

Car imports have risen, from $184 million in 2002 to $1.5 billion in 2007.[23] In 2006, the government lowered the automotive import tariff levels to 90 percent for light weight vehicles and since then a huge influx of imported vehicles has been witnessed in the country.[17] The tariff level for import of heavy vehicles is even lower at 20 percent, due to low levels of local production and high demand. As a result, a variety of automotive brands are being presently imported into Iran including Toyota, BMW, Mercedes Benz (these three being the expensive and/or luxury brands), Rover, Ssangyong, Audi, Subaru, Volkswagen, Renault Leon, Altea variety of heavy vehicles, construction and mining equipment from leading manufacturers such as Mercedes Benz, Renault, Iveco, Mann, Kamaz, Caterpillar.[17]

Fuel rationing

Main articles: 2007 Gas Rationing Plan in Iran, Environmental issues in Iran, and Fuel Smugglling in Iran

Demand is supported by the fixing of fuel prices well below market levels. Regular petrol in Iran costs IR800/litre (9 US cents/litre) and premium grade petrol IR1,100. The nation's abundant oil reserves have enabled the government to keep prices low (Iran is the second-largest exporter in OPEC). However, low prices have encouraged wasteful consumption and the smuggling of petrol into neighbouring countries such as Turkey, Pakistan and Afghanistan.[5] Some 1.8 billion liters of oil products worth 10 trillion rials ($1 billion) are smuggled out of Iran per annum.[33]

Given Iran's limited refining capacity, there has been a shortfall in petroleum products in recent years, requiring Iran to import an estimated 100,000 barrels/day in 2006/07. As a result, there is a recognition among many policymakers of the need to raise prices, and gradual increases have been implemented. However, these have tended to lag the prevailing rate of inflation, and given that raising petrol prices is politically difficult the provision of cheap fuel is likely to persist in the medium term, encouraging the purchase of vehicles. The government was nevertheless forced to take action in June 2007 when it announced both a petrol increase to 12 cents/litre and the imposition of fuel rationing, much to the chagrin of vehicle owners. The policy, which allocates 120 litres maximum per month (following revisions in December) to private car owners, will run until end-2008/09.[5]

In 2008 and 2009, Iranian government spent over 3 billion dollars on CNG infrastructure as part of its plan to convert its fuel policy from gasoline to CNG.[34]

Perspective

See also: Iranian targeted subsidy plan
Iran Automotive Forecast (Source: EIU)[5] 2007 2008 2009 2010 2011 2012
New passenger car registrations ('000) 1,294 1,447 1,563 1,669 1,806 1,962
Stock of passenger cars (per 1,000 population) 94 107 119 133 146 159

Like other sectors, the automotive industry is suffering from a lack of foreign direct investment (FDI) and capital imports. The privatization process is moving extremely slowly (2008). International sanctions, high inflation, exacerbated by fuel price hikes, and dampened consumer demand have depressed growth in the passenger car segment, but industrial growth coupled with infrastructural development is spurring demand in the commercial vehicles segment. Iranian automotive market will contract in the 2008/09 Iranian year (running from 20 March) and that annual domestic sales are unlikely to exceed 1mn units over the next five years.[24]

See also

References

  1. ^ a b c "Resources - Iran's Automotive Industry Overview". Atieh Bahar. 2008-10-20. Retrieved 2010-11-28.
  2. ^ "Iran ranks 5th on OICA growth chart". PressTV. 2010-08-18. Retrieved 2010-11-28.
  3. ^ "Fars News Agency :: Iran Ranks 5th in Car Production Growth". English.farsnews.com. 2010-08-18. Retrieved 2010-11-28.
  4. ^ SAPCO: Iran Automotive Industry’s Market Shares (September 2001). Retrieved November 14, 2008.
  5. ^ a b c d e f g h "Iran Automotive Forecast", Economist Intelligence Unit, August 18, 2008 {{citation}}: |access-date= requires |url= (help); Cite has empty unknown parameters: |coeditors= and |coauthors= (help)
  6. ^ "Atieh Bahar". Web.archive.org. 2008-06-17. Archived from the original on 2008-06-17. Retrieved 2010-11-28.
  7. ^ "Iran unveils four new 'Samand' cars". Digitaljournal.com. Retrieved 2010-11-28.
  8. ^ "Iran-Khodro Starts Samand Assembly in Senegal". Payvand.com. Retrieved 2010-11-28.
  9. ^ "Iran car exports projected to reach $1b by March". Payvand.com. Retrieved 2010-11-28.
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  12. ^ "Yahoo! News". Sg.news.yahoo.com. Retrieved 2010-11-28.
  13. ^ Sheikholeslami, Ali (2010-07-21). "Iran Sells 18% of Saipa Automaker for $1.6 Billion, Tehran Exchange Says". Bloomberg. Retrieved 2010-11-28.
  14. ^ "Iran Investment Monthly Sep 2010.pdf" (PDF). Retrieved 2010-11-28.
  15. ^ Iran Daily - Domestic Economy - 06/12/07[dead link‍]
  16. ^ "Iran ranks 2nd in using gas-fueled cars". tehran times. 2010-09-20. Retrieved 2010-12-18.
  17. ^ a b c d e [3] Cite error: The named reference "iran-daily.com" was defined multiple times with different content (see the help page).
  18. ^ Iran Daily - Domestic Economy - 06/15/08[dead link‍]
  19. ^ "Automotive Industry and Market of Iran 2007". Marketsandreports.com. Retrieved 2010-11-28.
  20. ^ "وب سایتهای ایرنا - Irna". Retrieved 2010-11-28.
  21. ^ a b "Motorcycles Account for 30% of Air Pollution in Tehran". Payvand.com. 2006-11-22. Retrieved 2010-11-28.
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  23. ^ a b Payvand:Iran car exports projected to reach $1b by March. Retrieved October 24, 2008.
  24. ^ a b c "Iran Autos Report Q4 2008 Market Report, Industry Analysis and Market Trends - 02 October 2008". Companiesandmarkets.com. 2008-10-02. Retrieved 2010-11-28.
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  29. ^ "INIC - News - Nanotechnology Finds Application in Iran's Car Industry". En.nano.ir. 2009-11-05. Retrieved 2010-11-28.
  30. ^ "Iranian Auto-Makers in Iran Nano Festival". Payvand.com. 2006-11-22. Retrieved 2010-11-28.
  31. ^ a b "COUNTRY BRIEFING: Iran", Licensing and intellectual property, Economist Intelligence Unit, 19 Mar 2008 {{citation}}: |access-date= requires |url= (help); Cite has empty unknown parameter: |coauthors= (help); Unknown parameter |coeditors= ignored (help)
  32. ^ a b [9][dead link‍]
  33. ^ [10][dead link‍]
  34. ^ Radcom. "IRAN NGV 2010". Ecasb.com. Retrieved 2010-11-28.
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