Economy, Auto

Raise Domestic Content or Quit

Raise Domestic  Content or QuitRaise Domestic  Content or Quit

Chinese car manufacturers will have to leave Iran, if they fail to increase the share of local content in their production plans for Iran, a deputy minister said.

“In view of the recent standards, the Chinese should speed up their activities to increase the share of local parts in their car production projects in Iran,” Mohsen Salehinia, the deputy industries minister, was quoted as saying by Press TV.

“Otherwise, they will be knocked out from the Iranian auto market in the next [Iranian] year [starting March 20].”

Iranian media reported last July that a surge in interest by European automakers to get a foothold in the Iranian auto market was pushing Chinese brands to leave, though they are expected to put up a good fight.

Reports quoted officials from China’s leading automaker Chery Automobile Company as saying that the company’s share of the Iranian market had declined over the past year.

They said Chery was previously warmly welcomed in Iran because of its relatively lower price, but there had been a decline in Iranian enthusiasm toward the company’s products with the removal of anti-Iran economic sanctions.

Nevertheless, speculations about the probable exit of Chinese car manufacturers have been regularly debated by the Iranian media, but these have increased with the prospects of international auto majors entering the domestic market in the post-sanctions era.  

“Some Chinese car producers whose products are of low quality will eventually have to bid farewell to the Iranian market,” said Shahram Azadi, an economist and university professor in Tehran.

“The screw will tighten for Chinese producers if European car [companies] manage to provide products that are cheaper and of better quality,” he added. 

Several top European auto brands have already started serious talks to operate in the Iranian auto market. They include Renault and Peugeot from France as well as Mercedes-Benz and Volkswagen from Germany.

The Chinese made their forays after the Europeans pulled out of Iran in the wake of intensified sanctions in 2011. They began by supplying trucks and passenger vehicles.

Chery was the first Chinese carmaker to set foot in Iran. Presently, eight Chinese automakers are supplying or assembling 27 models in the Iranian market.

Chinese car companies have hit back on at least one occasion stating that their products are not faulty and it is the responsibility of the Iranian driver to take care of their cars better. A Chinese CEO recently said Iranian drivers break their cars because of their poor driving.