Economy, Auto

Auto Part Imports Harming Local Industry

Auto Part Imports Harming Local IndustryAuto Part Imports Harming Local Industry

Statistics show nearly 60% of auto parts in the Iranian market have been smuggled into the country, an official with Iran's Chamber of Commerce, Industries, Mines and Agriculture, said.

According to Mahmoud Najafi Sohi, due to the excessive amounts of smuggled parts and even legally imported auto parts, shopkeepers refuse to sell locally manufactured parts, Fars News Agency reported.

The official said statistics from the Ministry of Industries, Mining and Trade indicate that over 50% of auto factories in industrial parks have either been entirely shut down or are only using 50% of their production capacity.

"Iran has been accommodating the imports of auto parts by reducing tariffs while local manufacturers have not been able to pay the wages or insurance premiums of their laborers, and grapple with non-performing loans and high taxes," the official said.  

Aside from Chinese and Indian goods, the Iranian market has also been infiltrated by Turkish auto parts after Iran and Turkey signed a bilateral preferential trade agreement in January 2014. The much maligned PTA came into effect a year after, allowing both sides to revise import tariffs to protect their domestic industries.

Following the PTA, Turkish commodities flooded the Iranian market, harming local manufacturing and industries.

  Tire Market

The country's leading auto manufacturers, Iran Khodro Company and Saipa, are in debt to local tire producer Kavir Tire by more than 850 billion rials ($25 million at market exchange rate).

IKCO and Saipa must sort this matter out for Kavir Tire to be able to sustain its current 94% productivity rate, Kavir Tire's CEO said on Tuesday.

According to Mohammad Hossein Komeili, nearly 20% of locally produced tires are manufactured by Kavir Tire. The 15-year-old company now produces 10,000 tires worth 10 billion rials ($300,000) daily and its annual sales amount to 3.5 trillion rials ($105 million), Tasnim News Agency reported.

Local tire industries have been struggling, as low quality foreign tires have swamped the market.

"Revising import tariffs and imposing stricter standards at customs is the least officials can do to help strengthen the local tire industries," Komeili noted.