Iran’s carmakers feel pinch of US sanctions

Any downturn in the auto industry could further worsen unemployment in the country

Across Iran’s capital, rush-hour traffic always grinds to a halt, a sea of boxy Renault fourdoors and Peugeot coupes all idling their way through the streets of Tehran.

Soon, however, Iran’s faltering nuclear deal with world powers may be what causes the country’s domestic automotive market to stall out.

As Iran’s currency suffers precipitous falls against the US dollar, cars are growing more expensive even as tens of thousands clamour to order domestic models online. Meanwhile, Western manufacturers are pulling out and foreign-produced parts are becoming harder to find as Chinese cars fill the void.

“It is clear and obvious that the US is purposefully putting pressure on the people of Iran to instigate discontent” over the auto market, said Mohammad Reza Najfimaneh, the head of the Iranian Specialized Manufacturers of Auto Parts Association.

Iran has a huge demand for automobiles. In 2017 alone, Iran produced more than 1.5 million cars, up some 14 per cent from the year before, according to a report by Iran’s Ministry of Industries.

Some 90 per cent of market share is controlled by two local companies: Iran Khodro, which assembles Peugeotbranded vehicles from kits, and SAIPA, which has made Citroens and Kias. Both manufacturers also build Renaults.

Concern over Iran’s domestic auto industry has been high. That was shown in a visit to Iran-Khodro last week by Ali Shamkhani, the secretary of Iran’s Supreme National Security Council. More than 100,000 people are employed by Iran-Khodro and SAIPA, while another 700,000 Iranians work in industries related to car manufacturing.

There are fears that any downturn in the auto industry would further worsen unemployment in the country.

Jobless rate

Iran’s official unemployment rate is 12.3 per cent, meaning some 3 million people are out of work, but experts believe it is much higher. Those unemployed often try to scrape enough money together to work as taxi drivers in the city, meaning they could be doubly hit.

In the absence of Western car makers, however, China is already starting to show up in the country. A new dealership for Chinese automaker Chery recently opened in Tehran.

“The Chinese cars are selling very well in Iran,” car dealer Ali Razavi said. “Their dealerships offer a wide range of methods of leasing and financing that enable many customers to buy a new car for just about $2,000 to $4,000.”