30 Jan 2013 (46 Pages)
Includes 3 FREE Quarterly Updates.
In our previous report
Iran's auto industry continues to show mixed messages. As such, we have kept our sales and production forecasts unchanged this quarter.
Iranian carmakers exported 21,985 cars worth US$123mn in the first four months of the Iranian calendar year starting March 20. Key export markets were Iraq, Afghanistan, and Ukraine. The country plans to produce at least 3mn cars and export 1mn cars by 2025. Around 1.6mn cars were produced and 55,000 cars exported in the previous calendar year.
According to RFE/RL in August 2012, Iran's leading domestic firmIran Khodro (IKCO) announced it expects sales and exports to its main markets in Russia, the Middle East, South America and Africa to 'boom' 45%. This is down to interest in its domestically made and designed 'national' car, the Runa, unveiled in 2009. IKCO is also confident about its revamped sedan model, the Samand, which is exported to Russia via an assembly plant in Belarus and also made in Iraq. IKCO intends to adopt new marketing strategies in an effort to export 16% of its output in the coming three years and enhance its global market share. IKCO's ambitious export plans could be buoyed by the rapid development of alternative fuel vehicles, which may find a niche in markets where there is demand for green cars.
Despite this bullishness, sanctions are hitting Iran's domestic autos industry, which is the second largest sector in Iran, behind the oil and gas sector. In July the Industry, Mines, and Commerce Ministry announced that overall domestic auto output fell 36% in the first quarter of the Iranian year (March 21 to June 20) because of 'lack of money' to buy assembly parts. According to Bloomberg Business Week, Iran's Donya-e Eqtesad newspaper quoted Mohammad Reza Najafimanesh, a union official, saying that Iran had to produce 2mn cars in the current financial year, but was likely to make only around 1.5mn, which would amount to a 25% fall. The Tehran car parts dealerNasser Ahmadi said its sales have fallen 60%.
Iran's industry, mine and trade minister Mehdi Ghazanfari has said IKCO and Iran's other major car manufacturerSaipa are struggling to pay their debts to domestic parts makers. The ministry has given the firms loans totalling 500bn toumans to avoid unemployment for hundreds of thousands of workers in auto parts manufacturing plants. Ghazanfari warned around two million jobs were on the line if the auto parts manufacturing sector, and consequently car manufacturing as a whole, closed down. The Mehr News Agency says hundreds of car industry jobs have already been slashed across Iran.
The problems directly relate toPSA Peugeot Citroen's decision in March 2012, following its tie-up with General Motors Company, to stop supplying parts and assembly kits to Iran. The French firm had made up around 40% of Iran's auto output through its tie-up with IKCO. In May, Italian carmaker Fiat also suspended sales to Iran, saying it would support 'the efforts of international diplomacy to find a diplomatic solution to the issues relating to Iran'.
The US lobby group United Against Nuclear Iran (UANI), which lobbied for an end to Peugeot's involvement in Iran, is continuing its efforts to get foreign automakers out of Iran. It says thatIsuzu, Kia Motors, Mazda Motor, Mitsubishi Motors, Nissan Motor, Peugeot, Renault, Suzuki Motor, Toyota Motor and Volvo either export to the Islamic Republic or have manufacturing agreements with car companies controlled by the regime.
UANI launched its 'Auto Campaign' in March 2012, citing aBMI report into how the enforcement of economic sanctions on Iran has resulted in the country's government prioritising the development of a strong domestic auto industry. UANI says in recent months, Hyundai Motor and Porsche have ended their business in Iran in response to its campaigns.