Economy, Domestic Economy

51% Stake for Foreign Firms in Auto Industry

51% Stake for Foreign Firms in Auto Industry
51% Stake for Foreign Firms in Auto Industry

Foreign investors can now own up to 51% of Iran’s car companies, minister of industry, mine and trade, Mohammadreza Nematzadeh, suggested on Friday.

Any foreign investment in Iran in the form of joint venture can be realized in accordance with the Company Registration Act, which enables foreign investors to launch partnership with Iranian companies or to participate in setting up a new company with their Iranian partners.

Foreign investors, under the current company registration practices, are not authorized to hold more than 49% of the capital of the company. The law offers no privileges and incentives were offered to the foreign investors.

“For the auto industry to be more competitive, the old practices have to be modified. And in order to be economically profitable, car-makers have to be able to produce over 100,000 cars per year,” he was quoted by IRNA as saying.

He said that car-making units should refrain from producing what he called “low-quality products” that fall short of international standards.

“Every domestic car-maker must be able to establish new sub-brands,” he added.

Pointing to foreign investors’ capacities and the role they can play in Iran's auto industry he said, “Foreign investors can bring knowledge, expertise and numerous other opportunities to Iran’s auto industry.”

He pointed to the fact that production is a process that includes design, marketing and export.

He further added, “We have to be able to cooperate with the world’s best industrial entities, a move that ultimately helps Iran to improve the situation of its auto industry.”

The domestic auto industry’s output has increased recently, recording 72% growth compared with the same period last year.

As talks between Iran and six major powers on Iran’s nuclear program enter the final stages, global car companies have started conducting fact-finding missions, meeting with potential Iranian partners and jockeying for position to enter the Iranian market, should an end to sanctions open Iran’s economy to the world.

Iran's largest car-maker, Iran Khodro Industrial Group, has restarted partnership talks with international car-makers including Renault and Peugeot, key former joint-venture partners, which pulled out of Iran in 2012.

Sanctions on Iran's auto industry were suspended as a result of last November's interim nuclear deal, which allowed Iran to import auto parts. The restrictions are expected to be permanently lifted if a final nuclear deal is reached between Iran and the P5+1 by the November 24 deadline.

Iran's auto-makers have been squeezed between the international sanctions and the domestic economic slump. Last year, Iran Khodro cut its production to 500,000 cars, half its capacity, due to weak demand. Before the suspension in November, the US banned any international dealings with Iran's auto industry last summer, impairing Iran Khodro's ability to import pistons, cylinders and other parts for its locally-made units.

Still, Peugeot and Renault sedans continue to roll off Iran Khodro's assembly lines at the company's production headquarters in a west Tehran suburb using technologies and designs acquired years ago from the French companies and in conjunction with Chinese auto part manufacturers.