Economy, Auto

Iran, China Set Ambitious Target

Iran, China Set Ambitious Target
Iran, China Set Ambitious Target

The international community became fully aware of the seriousness of Iran and China about future cooperation, with the announcement this week of bilateral deals worth $600 million between the respective capitals making this point dramatically clear to all others.

In the vanguard of this growing relationship is the joint Chinese-Iranian auto project–wherein China sends complete knock-down (CKD) kits to Iran and they are assembled in Iranian factories to avoid import taxes of fully finished units.

This relationship did have a pride of place in the proceedings during Chinese President Xi Jinping's recent visit to Tehran and his announcement about the beneficial growth between the two countries.

China's Chery has led the East Asian country's charge in the Iranian market while producing 180,000 vehicles so far. Through its manufacturing base in Kerman in the southeast of the country, more than 2,500 people are employed with over another 7,000 people active in tertiary industries.

Modiran Vehicle Manufacturing Company aims to increase its vehicle production to up to 60,000 vehicles a year from the southern base, with the Chinese partner more than willing to increase its share in the face of increased European competition from a re-emergent Renault and a very interested Volkswagen.  

"The cooperation with Chery has brought us a lot. We have an excellent brand and better quality than local brands. The reason is that Chery has this spirit to keep pursuing better quality and to provide consumers with better cars," said Hossein Zaeimzadeh, tech manager of Chery Iran, according to CNTV News.

Although specific details of the recent deals are still foggy, there are some green shoots suggesting the current relationship is just the first stage of a growing industry.

Chery said in a recent announcement that it hoped when sanctions were removed from the Iranian economy, it would lead to a creation of a "China-Iran Car Industry Zone," which would, according to the Chinese press release, "create an industrial cluster from groups of carmakers and auto parts providers."

This news also follows other news of Chery's interest in its Iranian brand, with a new program to train its Iranian engineers in Beijing.

When the present training ends at the end of the month, the MVM employees will return home to help reach the company's goal of expanding annual production capacity.

Chery's chairman and general manager, Yin Tongyue, signed the agreement to expand MVM on Friday, according to Chery.

The Chinese president noted during his trip that MVM sold about 40,000 cars in Iran last year, making Chery the top-selling foreign car brand in the market.

Other Chinese brands have also entered the market with full force, such as Brilliance–the company that assembles BMW in China–producing hundreds of units with the country's second largest auto producer SAIPA.

Iran Khodro has also gotten in on the deal by presenting a Chinese SUV called Haima S7.

As the Chinese economy continues to stumble, startling global economists (Davos was a clear example this week), Chinese companies need to rediscover real tangible growth and capitalize on the mature Iranian market.

Xi's visit this week was aimed at redirecting attention to achieving both these objectives.

By setting an ambitious bilateral trade target of $600 billion in 10 years, both Iranians and Chinese partners need to get down to work really hard and seriously to meet that target.