Iran revs up for Auto Revolution

Ahmad Pourfallah, head of the Iranian-Italian Chamber of Commerce, told the Fars News Agency that Fiat is finalizing negotiations with IKCO to buy a part of its shares and establish a joint venture later in the year.

Meanwhile, SAIPA, the second-largest Iranian car manufacturer, has its own development plans as part of the broader national effort to boost the auto sector. The Asr-e Khodro news site reported April 9 that SAIPA will probably sell 49% of its shares to Citroen. The possibility of the establishment of a joint venture with Citroen was confirmed by Naser Agha-Mohammadi, SAIPA Group’s vice president for product development, in a recent interview with leading economic newspaper Donya-e Eqtesad.

SAIPA, which consists of seven manufacturers, plans to select up to four strategic foreign partners, which would enable SAIPA to develop its brand both nationally and internationally, Agha-Mohammadi said. A total amount of 500 million euros ($564 million) in foreign direct investment will soon be made, an investment that would considerably elevate the status of SAIPA, and more broadly, transform the whole industry in Iran, Agha-Mohammadi said. Other likely partners are France’s Renault, Japan’s Nissan and South Korea’s KIA.

Yet despite the Rouhani administration’s all-out efforts to turn the sluggish Iranian auto industry into a more productive one, it has forecast a 33% rise in revenue from car import tariffs in the budget currently being reviewed by parliament. The budget forecasts 22 trillion rials ($726.6 million) in revenue from car import tariffs, up from 13.68 trillion rials ($451.8 million) last year.

Critics say the administration is unlikely to meet the target revenue, as domestic demand for expensive cars has already fallen. Given this situation and the 43% drop in revenue from car import tariffs last year, perhaps the best solution would be to allow more affordable cars to be imported.

Thus, although the ownership structure of Iranian automakers is set to dramatically change over the coming year or so, it need not necessarily be to the detriment of those exporting cars to Iran. Auto giants can keep sending vehicles, with the exception of luxury cars, to the 80-million-strong Iranian market as long as there is a lack of high-quality domestically made cars that meet both industry standards and are affordable for the middle and working classes.

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