Iran ambitious to become car making hub in Mid-East
3 MARCH 2016, 16:49 (GMT+04:00)
By Aynur Karimova
Iran seems to be ambitious to become a car production hub in the Middle East region, regarding the car making industry as the biggest field of non-oil economy.
Mohammad Jamali, the head of Iran's Saipa automaker, believes that the Islamic Republic is capable of turning into a car making hub in the region given the country’s geopolitical situation and its high security. He has also called on the international car makers to join efforts with Saipa.
The automobile industry accounts for nearly 10 percent of Iran’s gross domestic product. The latest data shows that Iran ranks 18th on the list of the world’s top auto manufacturers.
However, sanctions on Iran hit the automotive industry hard, slicing production by 1 million units from its peak of 1.6 million in 2011 and leading to 100,000 job redundancies.
Experts believe that removal of international sanctions from the Islamic Republic has created better conditions for Iran to realize its plans regarding the car industry.
Meanwhile, James Dorsey, a senior fellow at Nanyang Technological University's S. Rajaratnam School of International Studies, believes that initially, the car industry is likely to focus on the country's domestic market.
"Beyond the fact that Iran has a substantial domestic market in its own right and a long-standing industry with local models, the car industry needs significant upgrading to erase the effects of years of international sanctions, he told Azernews.
However, according to the expert, Iran will have to compete with Turkey in the car industry.
"In terms of being a regional producer and supplier, Iran is likely to have a fiercely competitive, uphill battle against Turkey that has a well-established car industry with many of the major brands and that supplies markets in Europe, Central Asia, the Middle East and North Africa," he said.
The 2014 production statistics released by the International Organization of Motor Vehicle Manufacturers show that Iran’s auto production increased by 46.7 percent in the 12-month period. The figures indicated that Iranian automakers produced 1,090,846 cars and commercial vehicles in the mentioned period.
The lifting of international sanctions from Iran has given an impetus to the development of this sector of the national economy as since January 2016 the country's car making industry is one of the most appealing sectors for foreign investments.
Today, the race has tightened for access to Iran’s auto market. European automakers, which were forced to leave the Iranian market after international sanctions on the Islamic Republic for its nuclear program, are now attempting to restore their previous shares of Iran’s vast car market.
Earlier, President Hassan Rouhani called on international companies to cooperate with Iran to develop the country’s auto making industry. He said Iran welcomes foreign carmakers to come, do research and produce.
He also criticized the government's policy over the past decades on imposing restrictions against importing foreign cars and urged all officials involved in car making industry to make efforts to please people, saying "we cannot close the doors and make people buy home-made cars."
Dorsey believes that as the Iranian car industry has historic relations with France, Peugeot has already returned to Iran in the wake of the lifting of the sanctions.
"Other European and perhaps Japanese manufacturers may well follow," he noted.
Meanwhile, economists claim that the country’s automotive industry needs modernization after years of sanctions. Iran’s car part manufacturing industry needs to absorb $8 billion worth of foreign investment in a long-term period.
President Rouhani has urged for fully privatizing the car industry in Iran for achieving its development. He said the policy for privatizing car industry aims to create competition which will lead to lower prices and enhancing quality.
Dorsey believes that privatization, being one of the key strategies for rehabilitation of the Iranian economy, will facilitate upgrading and modernization of the Iranian car industry, as well as its growth.
Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova