0438 GMT September 22, 2020
The auto industry is a key driving force in Iran, the operation and prosperity of which keeps more than 60 other industries moving, according to Press TV.
The industry is only second to Iran’s energy sector, accounting for some 10 percent of the gross domestic product and four percent of the employment in the country.
Iran began manufacturing its own car in 1967, churning out the box-shaped Paykan, which was a replica of the British-made Hillman Hunter. It also imported mainly from Western Europe and the US, which accounted for approximately 40 percent of Iran’s market.
However, the baby boom during the first decade after the victory of the 1979 Islamic Revolution generated a young population which was almost 75 percent urbanized by 2017 and hungry for cars.
The post-war – Iraqi-imposed war (1980-88) – governments decided to give a new lease of life to the auto industry, but opted to stop manufacturing and start assembling instead, because they thought Iran could not compete with strong international carmakers.
International players, meanwhile, showed interest in the Iranian market and policies were put into place that allowed car imports without technology transfer.
France, a partner of Iran in the automotive industry for a long time, entered into new joint ventures with main producers Iran Khodro Company (IKCO) and Saipa.
To meet the domestic demand, automotive production rose by more than 18 percent in 2017. Iran produced 1.4 million cars and commercial vehicles, ranking sixteenth in the world.
However, foreign companies that made cars in Iran – including France’s Peugeot and Renault – decided to leave after US President Donald Trump announced new sanctions on the Islamic Republic in 2018.
Renewed sanctions led to delays in car deliveries and a shortage of parts and by June 2018, a month after the sanctions were renewed, Iran’s car production dropped by 29 percent compared to what it was in the same 31-day period a year earlier.
Iran has gone through waves of sanctions since the victory of the Islamic Revolution that have spilled over into the daily life of people in the country of about 85 million.
On the flip side, the pressures have been a boon to domestic manufacturers who have thrived under the new situation because Iran cannot afford to drop its automotive industry altogether. The sector is so massive with its solid infrastructure in production, which is of both economic and political importance to the government.
More than 100,000 people are employed by the two largest local manufacturers IKCO and Saipa, while another 700,000 Iranians work in industries related to car manufacturing.
There are around 13 public and private auto manufacturers in Iran, with IKCO and Saipa accounting for about 94 percent of the domestic production.
After the US reimposed its sanctions, Iran’s union leaders warned that up to 450,000 jobs in the auto parts industry were at risk, prompting the Defense Ministry to wade into the quandary.
The ministry is now helping the Iranian carmakers manufacture hi-tech auto parts, which the country used to import.
Cars produced in Iran under license from foreign manufacturers rely on critical imports of parts ranging from airbags, pistons and cylinder heads to computer chips, including engine control units and sensors.
IKCO Managing Director Farshad Moqimi on Tuesday said Iran is now producing more than 50 parts, which were imported.
“With the measures we have taken in the field of domestic production and self-sufficiency… we have been able to reduce more than $50 million in production costs and planned for another $300 million in reduced costs,” he said.
Moqimi said IKCO has produced more than 172,000 cars since the beginning of the current Iranian calendar year (March 20), up by 36 percent against the figure for the same period last year.
“A 30 percent increase in car delivery to customers is also one of IKCO's recent achievements,” he noted, adding 51,000 cars out of a total of more than 200,000 that had not been delivered on time have been handed over to their owners.
“When the US has targeted the automotive industry and started its sanctions from this sector, we must work together to maintain the flag of production in this industry flying high,” Moqimi said.
He noted that although Iran is now self-sufficient in the production of some parts, it has a problem in supplying raw materials and has to meet its needs through imports, adding increasing domestic production of the raw materials should also be placed on the agenda.