Conditional Emergence of Car Industry

Conditional Emergence of Car Industry
Conditional Emergence of Car Industry

If Iran and the P5+1 (the five permanent members of the UN Security Council plus German) finalize a potential deal on the country’s nuclear program in the coming months, the country’s automotive industry would tehn be the next emerging market that cannot be missed, says an article published on the Automotive News website this week.

The article notes that development of the Iranian auto industry has been stunted by economic sanctions and years of political tension with the US and elsewhere in the West hampered international relations between the countries.

Iran Khodro and Saipa, are “highly interested in joint ventures” with foreign automakers, said Stephanie Vigier, the principal Middle East analyst at IHS in Paris. “They want to attract technology. They want to be able to make all the components in Iran and want to produce cars fully. They [also] want to export cars to other countries,” she said.

Iran produced one million light vehicles in 2014, according to the Organisation Internationale des Constructeurs d’Automobiles (OICA), an organization of global auto manufacturers. But that is down from down from 1.65 million in 2011, when Iran ranked as the world’s 13th largest auto producer. Many of the vehicles made now are built from complete knockdown kits.

Analysts see potential in Iran because of its size and great pent-up demand. It has just under 80 million people -- slightly more than Turkey and nearly as many as Germany. Many are looking for better cars, and a sizable younger generation will soon reach car-buying age. Some analysts estimate half of the cars on the road are more than 20 years old. Michel Jacinto, another IHS analyst, said the cars that roll out of Iranian plants now are roughly the equivalent of what appeared on US or European roads 10 to 20 years ago.

Besides desiring partners who can provide modern safety and environmental components, Iranian automakers also are eager to have help adding infotainment technology and producing a wider range of vehicles, such as microvans, four-wheel-drive vehicles and family sedans, Jacinto said. IHS’ Vigier noted even the recent modest relaxing of economic measures has had an effect. In March, Peugeot renewed its 50-50 partnership with Iran Khodro, and will work to replace the 206 and other older models that were being produced. “If there’s a nuclear agreement, there will more and more development of the auto industry,” she said.