Iranian Carmakers Mull JVs With Russian Counterparts

EghtesadOnline: As traditional foreign partners of Iranian car companies suspend their operations or leave, the local automotive firms are looking north and seeking partnerships with Russian counterparts.

News ID: ۷۴۸۵۰۱

22 September 2019

International carmakers with decades-old presence in Iran pulled the plug after Washington imposed blistering sanctions against Tehran last year.

Some of the car companies that have curbed their Iran ties are, France’s Peugeot, Renault and Citroen, along with China’s Brilliance, Haima, Dongfeng BYD, Great Wall, MG and Lifan.

The head of Iran Vehicle Makers Association said Washington has threatened to impose punitive penalties against international carmakers that breach its sanctions against Tehran, according to Financial Tribune.

Ahmad Nematbakhsh noted that some Chinese automotive companies have no ties with the US and are willing to join Iranian ventures.

However, firms having the slightest link with the American auto market would prefer to err on the side of caution and avoid breaching the US embargo against Iran.

According to Nematbakhsh, the establishment of automotive joint ventures between Iran and Russia is on the table, stressing that such partnerships are a last resort for Iran auto industry.

He believes politics would play a major role in the development of such a partnership.

Deteriorating Conditions

Referring to the deteriorating conditions of Iranian auto industries, Nematbakhsh said some 150,000 unfinished vehicles are gathering dust in the warehouses of local carmakers, as they do not have the auto parts to complete the vehicles and deliver them to customers.

Previously, the Industries Ministry regularly published statistics about the output of local car companies. However, following consecutive declines, the ministry stopped publishing such reports.

Since June 2018, Iran’s auto production has been plummeting.

The last batch of data released by the Industries Ministry shows that the decline has continued in the second month of the current fiscal year (ended May 21). Since past four months, the ministry has stopped releasing auto production stats, leaving analysts in the dark.

Iranian carmakers produced 87,821 cars and commercial vehicles in the month ending May 21, registering a 16.1% decline compared with a combined output of 104,684 units in the corresponding month of the year before.

In fact, car production dropped 17.3% compared to the previous year to reach 81,418 units.

In addition to being squeezed by US sanctions, mismanagement and lack of coherent roadmap have taken a harsh toll on Iranian auto industries. Major Iranian car companies Iran Khodro and SAIPA are owned by the state or state-affiliated entities.

For decades, the firms have received hefty aid packages from the government. However, so far, they have failed to produce quality vehicles that can meet international standards.

The companies are over-reliant on foreign suppliers for sustaining their operations and were cautioned about it, before US sanctions were reimposed on Iran in 2018.

Mismanagement and inefficiency have pushed Iran’s auto industry toward bankruptcy, despite a clear monopoly, unprecedented price hikes, large-scale presales and handsome state bailouts.

Whether there is a way out for the dysfunctional automotive industry is a question state managers must address soon for retaining their own job titles.