Since August 2018 and following the reimposition of harsh US sanctions, 280,000 Iranian workers have lost their jobs in the domestic auto parts industry.
Iran Auto Parts Makers Association has released a report indicating that the sanctions imposed by US President Donald Trump on Iran’s auto industries, as well as mismanagement, have taken a harsh toll on the local auto industry.
The association says 550,000 workers were employed in the country’s auto parts industry, of which 130,000 were laid off following the imposition of US sanctions. Contracts of 150,000 workers have also been suspended.
US sanctions have also saddled Iranian parts makers with a net loss amounting to 1.2 quadrillion rials ($10.3 billion).
The report further states that Iranian auto industries are operating at 40% of their nominal capacity and puts the value of auto parts makers’ assets at 2.5 quadrillion rials ($21.4 billion).
Rescue Package
According to the report, by the end of the last fiscal year (ended March 2019), local parts makers received a 40-trillion-rial ($342 million) aid package from the government.
The report states that the package helped parts makers sustain their operations for a few months, but due to the prevailing economic conditions, they again faced hardships.
Of the 1,200 registered auto parts companies in Iran, 400 have been forced to shutter their business or limit their operations.
The association further states that parts makers need 150 trillion rials ($1.3 billion) in loans and aid to sustain their business.
One of the issues that Iranian parts makers have struggled with for long has been delayed payments by carmakers. The report puts local car companies’ accumulated debt to the supply chain at 220 trillion rials ($1.9 billion).
Reportedly, 90 trillion rials ($770 million) of this sum should have been paid months ago.
Hard-Pressed Sector
Following Trump’s decision last year to pull out of the 2015 nuclear deal and impose new sanctions on Tehran, the Iranian economy has faced difficulties.
The national currency, the rial, has lost about two-thirds of its value since then and prices of almost all goods have soared to unprecedented highs. The greenback was traded at 116,800 rials in Tehran on Wednesday, though it hardly fetched 42,000 rials a year earlier.
The sanctions have disrupted Iran’s global banking and industrial ties and restricted the supply of raw materials, which are evident in the declining output of Iranian factories.
The key auto sector is one of the Iranian industries directly targeted by US sanctions that compelled European partners, including Renault, Peugeot, Citroen, Volvo and Daimler, to suspend their operations in Iran.
Chinese carmakers with ties to Tehran have also downsized their activities.
In addition to disruptions in auto part imports and foreign partnerships, the Iranian car industry has been struggling against “homegrown” headwinds.
Long blamed by experts, the two automotive firms’ incompetence in sustaining their operations, faulty government policies vis-à-vis the allocation of hard currencies for imports and over-regulation have derailed the sector and placed them on the road to bankruptcy.
Sliding Production
Since June 2018, Iran’s auto production has been plummeting.
Data released by the Industries Ministry show that the decline has continued in the second month of the current fiscal year (ended May 21). Since May, the ministry has halted publishing auto production reports, leaving analysts in the dark.
Iranian carmakers produced 87,821 cars and commercial vehicles in the month, registering a 16.1% decline compared with a combined output of 104,684 units in the corresponding month of the year before.
According to the data, car production dropped 17.3% compared to the previous year to reach 81,418 units.
Iranian firms manufactured 185,478 cars and commercial vehicles during the first two months of the last fiscal year, which figure plummeted to 140,917 this year.
