Import of auto parts stand at the top of the list of goods imported into the country according to data published by the Islamic Republic of Iran Customs Administration. During the year ending in March, $2.9 billion worth of auto parts were brought into the country.
The number has observed a 137% year-on-year growth. Furthermore, auto parts have a 5.35% share in Iran’s total imports in terms of value.
Following auto parts are corn feed ($1.6 billion), cars ($1.45 billion), rice ($1.2 billion) and soybean ($943 million), as the goods making up the major imports of the country.
The appeal of imported auto parts stem from the low tariff rates on them which have made way for cheap and low-quality parts from China, India and other countries to grab a significant share of the market. Parts shipped in from these countries are available on the market at much lower prices than local products. The customs duties on such products stand between 15% and 20%.
Auto parts manufacturers have demanded that the government raise tariffs on auto parts or impose tougher regulations.
The Auto Parts Manufacturers Association of Iran made a proposal a few months ago, according to which the association could have directly supervised auto parts imports.
The proposal had stated that auto parts imports should be allowed only if similar products are not locally manufactured or Iranian businesses’ output is below market demand. The association is of the opinion that it should also have a hand in the issuance of import permits.
The proposal was reviewed by the Ministry of Industries but to no avail. However, the government did raise tariffs on cars saying the high and rising volume of car imports is a luxury Iran cannot afford because it contributes terribly to the flight of hard-earned foreign exchange.
In the closing days of 2017, the government passed an amended version of auto import rules, according to which, depending on engine capacity, import tariffs on gasoline-fueled vehicles were increased 15-40%.
Import tariffs for vehicles currently stand at 55-95%, among the highest in the world. The rates were set as an incentive to encourage people to purchase domestically made vehicles and help bridge the country’s trade gap.
However, a breakdown of vehicles manufactured domestically shows that there are no local vehicles that are fully homegrown with Iran’s largest carmakers Iran Khodro and SAIPA over-relying on foreign suppliers to keep the wheels of their factories turning. In the best cases at least 7% of the parts used in Iran-made cars are imported while most vehicles cannot be manufactured without the assistance of foreign parts makers.
Iran Khodro
One instance is Tondar 90, produced for over ten years in the country by IKCO, which is 56% localized.
According to reports, 93% of the parts used in IKCO’s Peugeot 405 and Samand are made in Iran.
IKCO produces three other Peugeot models namely, 206, 301 and 2008. Statistics show that 70% of the parts used in the popular 206 are made in Iran, while locally manufactured parts have a meager share in the two other models (301 and 2008).
IKCO also collaborates with two Chinese carmakers namely Dongfeng and Haima. Iran-made parts have 40% and 20% shares in the vehicles produced by the company under the Dongfeng and Haima badges.
SAIPA
Just like its archrival IKCO, locally manufactured parts have a varying share in cars SAIPA sells in the huge and growing local market.
Pride, which has been a staple part of Iran’s auto market for 25 years, is 87% locally produced.
SAIPA produces several Chinese-derived vehicles in collaboration with Brilliance, Changan and Zotye. Hardly 20% of the parts used in the vehicles are made in Iran.
Both IKCO and SAIPA also assemble Renault’s Logan (Tondar 90). Around 44% of the parts used in this model are imported.
Privately owned automotive companies such as Bahman Group, Kerman Motor and Modiran Vehicle Manufacturing Co are doing as poorly as their semi-state-owned peers. Locally made parts have a scant 20% share in the cars the three companies churn out.
It merits mention that many locally manufactured auto parts also do not meet international automotive standards, a hurdle which has made foreign companies operating in Iran through joint ventures with local carmakers reluctant to use Iran-made parts in their products.
