How Iran’s Auto Industry became a Political Football

“Stability is super important,” he stressed, while criticizing how numerous actors have a finger in Iranian market policy although such decisions need to be made by the Rouhani administration alone.

Of note, in the last few months IKCO and SAIPA have resumed cooperating with Peugeot and Citroen. That three major partners in Iran’s automotive industry are French has raised concerns among some lawmakers about the future of the industry in the event of renewed external pressure. In an attempt to minimize the negative consequences of “bad contracts,” some parliament members have become involved in agreements with foreign investors in ways that pro-administration pundits say is excessive.

Farbod Zaveh, a car market expert, told Donya-e Eqtesad on Oct. 22, however, “In the case of the Iranian side of the contract being a state-run body, which is the case now, the parliament absolutely has the right to directly get involved in the matter.” According to Zaveh, the lawmakers have a legal right to oversee all foreign contracts.

Under the IDRO-Renault contract, Renault is committed to producing 75,000 cars at Bon Roo, the manufacturing site previously owned by SAIPA before IDRO seized it as part of a debt settlement. The French company is also committed to investing in the site to double annual production in the next phase and eventually achieve an output of 300,000 vehicles a year in five years.

Although Nematzadeh faced a tough grilling at the parliamentary hearing, no questions were apparently raised about the excessive government-imposed costs on domestic manufacturers that has made their car prices highly uncompetitive. In the fiscal year ending March 19, 2016, 31.5% of the consumer price of domestically produced cars went straight into the government’s coffer in the form of a variety of taxes, according to Donya-e Eqtesad, citing a survey conducted by an unidentified domestic carmaker.

Domestic automakers also complain that under current regulations, manufacturing vehicles whose technology is not yet fully localized is not economical, pointing out that producing such low-quality cars as the Tiba, Samand and outdated Peugeot 405 and Pride models makes much more sense than manufacturing the more advanced Logan (Tondar 90), which requires foreign parts.

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