All commercial sectors of the domestic economy could benefit from an opening up of the country's doors following the July 14 nuclear deal between Iran and six major powers, but the automotive industry is expected to lead this economic resurgence
According to the World Bank's new report, Iran’s car industry, comprising major companies like IKCO, Saipa and Kerman Khodro, comprises the country's second largest industrial sector and account for over 10% of Iran's gross domestic product.
"After the tightening of sanctions in 2012, car production declined sharply and reached 700,000 cars annually compared to 1.6 million prior to the sanctions," it said.
The main reasons for the auto industry slowdown were the depreciation of national currency, which increased the cost of imported parts and components, and the ban on imports of material and equipment.
Car sale revenues fell by half, costing the industry billions of dollars annually. Estimates show that the decline in auto production led to layoffs in this sector, which account for 4% of the workforce and is considered one of the main job-creating sectors in Iran. The WB says that if sanctions are lifted and international companies resume cooperation with Iran, automobile production will get a boost and reach somewhere close to its pre-sanctions' level within the next two years.
Until last year, the Iranian economy had been in recession for more than two years. Growth dropped to a negative 6.8% and 1.9% in 2012 and 2013, respectively.
The cost of sanctions to third-party companies cannot be calculated currently. However, many third-party parts companies have gone bankrupt over the past few years as major manufacturers are struggling to repay their debts.
