Iran automotive industry is the second biggest sector in country after Oil and Gas which makes more than 10% of GDP. More than 700,000 people are working in this industry which is equal to 4% of workforce of Iran. The Iranian manufacturers currently produce six different types of vehicle, including passenger cars, 4WD, trucks, buses, minibuses, and pickup trucks. Before Islamic Revolution production of this sector was about 200,000 units per year. After 1979 production of factories drastically increased, about 445% between 1998 and 2009, and made Iran ranked fifth in car production growth after China, Taiwan, Romania and India (according to OICA statics). The top production of automotive industry in Iran was in 2011 which was 1,649,311. According to OICA, Iran’s rank in 2011 was 13th.
In 2014, total auto production in the world was 87,507,027 units. China produced 24 million units and is largest automaker in the world, next two largest automaker are USA and Japan each producing 11 and 10 million units respectively. Currently, Iran with a production of about more than 1 million units per year is ranked 18th among automakers in the world and one of the largest in Asia. Total production of Iran for Persian calendar year 1393, was 1,232,724 units which 1,060,895 units was passenger vehicle and 171,829 was commercial vehicles. The table below exhibit market share of two largest auto maker of Iran and others.
Lower cost labor and abundance of raw materials combined with an 80 million domestic market and a potential 400 million regional market, Iran’s automotive sector has a great potential to be a production hub for Middle East and Central Asia. Number of employers in this sector has made it so important that the government has put a tariff on car imports which is currently about 75%. The industry’s main export targets are in the Middle East and CIS region such as Russia, Syria, Turkey, Iraq, Azerbaijan, Ukraine, Egypt, Algeria and Bulgaria. In 2007 Iran exported approximately 500 m$. In 2009 exports rose up to 1$ billion, but in 2010 because of sanctions it decreased sharply to 200 m$.
From 2011 to 2013, Iran’s automotive production dropped drastically due to sanctions about 40%. In February 2012, Peugeot, Frances largest automaker, decided to end relations with Iran, its largest foreign customer. Also, the sanctions have prevented Iran from importing parts, therefore it was a reason to discontent for domestic customers.
This sanction era experience has led Iranian companies to set new partnership conditions. In their negotiations with Peugeot, Iran Khodro has mentioned a term based on which at least 30% of the productions of the joint venture company must be exported to create an export hub in the region.
In conclusion Iran has a well-established automotive industry with a great potential market. Foreign Investment and technology transfer can boost the industry. Employment concerns is a good sign that the industry can enjoy government’s protection. The question is that if domestic companies can come to terms with unpleasant past experience with their foreign partners and start a long-term new partnership.