Economy, Business And Markets

Auto Industry Looks Set for Green Cars

Auto Industry Looks  Set for Green CarsAuto Industry Looks  Set for Green Cars

One of Iran’s major carmakers says it has held serious negotiations with a German economic delegation, which is also a member of the German Near and Middle East Association (NUMOV), with the aim of producing efficient and green engines, reported IRNA on Sunday.

Saeed Madani, the managing director of Saipa, said according to the law carmakers are required to move towards producing engines with high efficiency and less toxic emissions. Madani also expressed hope that with the removal of western sanctions imposed on Tehran over its nuclear energy program, such projects could be undertaken together with foreign partners. “We are willing to expand our ties with German auto parts manufacturers to accomplish our goals,” he added.

Madani stressed that foreign companies currently cooperating with Saipa will be classified in future joint ventures according to the level of their cooperation after the sanctions are lifted. He also pointed to the presence of Chinese companies in the domestic car market, urging the Europeans to speed up their participation in Iran’s car manufacturing projects.

Iran is an ideal marketplace for foreign investment as it can act like a bridge connecting its neighboring countries that mostly lack the suitable infrastructure in auto industry. Low labor costs (even lower than China), educated labor force, and abundant and cheap sources of energy are also among the factors which make the country a desirable place for foreign investors. Tax breaks for foreign investors are also an advantage, as numerous special economic and free zones have been established during the past few years. Manufacturers are being offered various tax exemptions in these special economic zones. In line with this policy, the Rouhani administration is willing to establish the country’s third car manufacturing hub in the southeastern port city of Chabahar.

So far, countries such as South Korea, Oman and China have expressed their willingness to invest in that region that has direct access to Oman Sea and the Indian Ocean.

The auto industry is Iran’s second largest employer after oil and gas, accounting for slightly less than 10% of the country’s GDP. Iran produced a total of 630,639 cars in 2013, which showed a 25.6% decline compared to 2012, largely due to western sanctions.

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Based on the 20-Year Vision Plan (ending in 2025), the country should produce 3 million cars per annum, out of which 1 million should be exported. The plan also clarifies that the country should annually make as many as 120,000 commercial vehicles.

In addition to the quantitative goals, the country has great emphasis on replacing the production of completely knock-down (CKD) scheme with production of cars using domestically manufactured parts.

Mohammadreza Nematzadeh, the minister of industry, mine, and trade, said on Sunday that based on the new three-year plan for the domestic auto manufacturing sector, 40% of the parts should be produced in the country during the first year, while the figure will stand at 50% and 60% for the second and third years, respectively, reported iribnews.

The minister emphasized that the development will help increase the value added and the employment in the sector. Pointing to the improved capabilities in manufacturing auto parts during the recent years, the minister added that the auto industry managers should set export as their main target and benefit from the presence of foreign advisers to adopt overall strategies. Nematzadeh added that energy efficiency and production of electric vehicles (EVs) should be promoted and the customers should be encouraged to prefer EVs to cars with higher rates of fuel consumption.

The industry ministry in November sent a package to the cabinet to be approved based on which the manufacturers and owners of electric and hybrid cars would be given incentives. According to Nematzadeh, the administration is planning to reduce pollution, especially in big cities, and has approved a zero percent tariff for imported electric and hybrid cars. The minister stressed that the elimination of tariffs was not enough and that was why incentives such as loans to producers and consumers as well as reduction in municipality car taxes and fees have been offered.

Currently, the auto industry and the relevant organizations are investing in production of Lithium batteries, as the essential element of the electric vehicle manufacturing. The EVs are expected to be mass produced the next Iranian calendar year (starting March 21, 2015). Iran has also banned the import of cars with over 2500CC engines. The move is aimed at boosting domestic production and making the auto industry competitive.