Iran’s 9-Month Automotive Import Bill: Chinese Parts Suppliers Call the Shots

EghtesadOnline: Auto imports during the nine months to Dec. 21 stood at about $2.9 billion indicating a 50.5% year-on-year increase according to data published by the Islamic Republic of Iran Customs Administration.

News ID: ۷۸۰۹۳۸

07 January 2018

According to IRICA’s website, auto parts had the largest share of the import bill (4.58%) followed by cars and heavy duty vehicles (3.11%), corn feed (2.97%) and rice (2.62%).

During the nine-month period, parts with total value of $1.72 billion (up 96.28% YoY) and, cars and heavy duty vehicles with total value of $1.16 billion (up 12% YoY) were imported.

>Capital Flight

The government last month passed an amended version of auto import rules, according to which, depending on engine capacity, import tariffs on gasoline-fueled vehicles have increased 15-40%. Currently, car import tariffs are between 55-95%. Policymakers and some government officials complain that the large auto import bills have become a prohibitive enterprise the struggling economy cannot afford, Financial Tribune reported.

However, the absurdity is that government has given the green light to semi-state owned carmakers to import auto parts in large quantities. Import tariffs on auto parts vary between 15% and 20%.

Furthermore, going through IRICIA’s 900-page report one comes across strange instances like the import of ordinary parts (including mudguards) for Pride, Peugeot 405 and 206 from China.

Pride is a small city car produced by the second largest local carmaker SAIPA since 1993. According to the company, it has sold over 7 million units of the model in the past quarter century. However, seemingly SAIPA still relies on Chinese suppliers for keeping this car’s production lines rolling. The sedan has a 33.7% share in SAIPA’s total output.

The Pride is based on a Kia Motor’s hatchback from the 1980s. The South Korean firm ended production of this vehicle in 2000.

Peugeot 405 has been produced by Iran Khodro since 1992. The vehicle has an outstanding 39% share in IKCO’s total output. However, it seems that producing the car for more than a quarter century was not enough for IKCO to improve and upgrade and end its reliance on foreign parts makers for manufacturing an unsophisticated four-wheeler whose quality is still open to question.

Furthermore, whenever criticism over production of outdated vehicles like Peugeot 405 and Pride, and the question of phasing out the low-quality models arise, both IKCO and SAIPA claim that several local firms supply parts for their cars and thousands of jobs are at stake if they are forced to stop manufacturing the two cars. Strangely, but not surprisingly, they fail to mention that jobs will be threatened in China, not Iran!

IRICA numbers show during the nine months the main source of auto part imports were China with $309 million (35%), South Korea $79 million (9%), UAE $49 million (6%), France $42 million (5%) and Turkey $38 million (4%).

This is while the Chinese-derived vehicles have 15% share of the total domestic automotive output while cars produced under French licenses and ventures have a 43% share of the market. However, spare parts bought from the European nation hardly have a 5% share of the import bill.

During the nine months ending in December the UAE with $527 million (45.19%), South Korea $124 million (10.63%), China with $56 million (4.86%) and Turkey $28 million (2.4%) were the main exporters of cars and heavy-duty vehicles to Iran. The Persian Gulf Arab state (UAE) is a major trading center and a re-export hub.