Iran: Automotive Industry 2014 outlook.

The Iranian automotive sector has been developed under strong guidelines defined by the governments starting from mid-eighties. The aim to develop local production has created barrier to competition and the over 100% duties imposed at imported vehicles, had almost blocked importation while the domestic production was developed on old production lines, bought from European (PSA, Renault) or Korean carmakers (Kia).

Car production in Iran has long been a political matter, with central government taking a role in directing the operations of Iran Khodro and Saipa. Iranian President Mahmoud Ahmadi-Nejad has in the past ordered them to open production lines in Venezuela and some African countries, despite such expansion being economically questionable.

The first effect of international sanctions – ONU started to put sanctions in 2006, while USA and EU started before – was that main European and South Korean partners have left the market while Chinese Chery, landed to cover the new opened space.

Most impacted was Iran Khodro’s (IKCO) joint venture with Peugeot. IKCO was producing the Peugeot, 206, 207, 405 and Pars. Following Peugeot cut of parts exports to Iran, local production fell by over 75%.

Although Iran experienced dramatic reductions in vehicle production during the Iran-Iraq war in the 1980s, the latest fall in volume is unprecedented, analysts say. Car and auto parts producers have been among the hardest hit by international sanctions that have caused a fall of more than 50% in the Iranian rial. Domestic media have reported that more than 110 auto part makers shut down and thousands of workers lost their jobs over the past years.

Moreover, Iran’s two largest state-run carmakers , Iran Khodro and Saipa, suffered for overstaffing – or “hidden unemployment”, as the domestic media call it – due to the decline in output and their financial results had been heavily hit by sharp decline in sales and huge increase in imported raw materials cost.

In a move to support carmakers, the government has allowed them to raise the prices of cars by about 25% starting from October 2012. For instance the price of the cheapest models of Kia Pride – the South Korean car which accounts for up to 40% of vehicles on the country’s roads – has officially increased from 75m rials ($3,053) to 119m rials ($4,845).

As far as domestic market data, retails statistics are not available, while production data are released on monthly basis. The export from Iran is really limited, considering the absolutely not competitiveness of their product and the hard social and political environment lived by surrounding countries, like Syria, traditionally open to Iranian products. The import is near zero, actually.

Following this consideration, we decided to start reporting production data on this market, having the opinion that they represent a picture – actually the only one – about car sales in the country. Of course, single month data are not statistically relevant.

In the next table, we report Top 10 Brand ranking, in production, by last month position:

Rank Oct

Rank Sep

Rank Ytd

Brand

Oct

Ytd 2013

I Half 2013

Sep 2013

Oct 2013

Ytd 2013

1

1

1

Saipa

21.232

195.344

38,6%

37,9%

37,5%

40,2%

2

2

2

Peugeot

19.980

137.970

24,6%

37,9%

35,3%

28,4%

3

3

3

Iran Khodro

10.401

80.706

16,6%

17,2%

18,4%

16,6%

4

4

5

Chery

1.690

21.186

5,9%

3,1%

3,0%

4,4%

5

6

6

Lifan

1.675

4.500

0,8%

1,2%

3,0%

0,9%

6

5

4

Renault

1.468

43.280

12,7%

2,5%

2,6%

8,9%

7

8

8

Mazda

79

814

0,2%

0,1%

0,1%

0,2%

8

7

7

Nissan

65

1.039

0,2%

0,2%

0,1%

0,2%

9

9

10

Great Wall

28

578

0,2%

0,1%

0,0%

0,1%

10

10

9

Suzuki

23

608

0,2%

0,0%

0,0%

0,1%

In the table below, the Top 10 Models produced in Iran order for last month data:

Rank Oct

Rank Sep

Rank 2013

Model

Oct

YTD Oct

I Half 2013

Q3 2013

Oct 2013

Ytd 2013

1

1

1

Saipa Pride

18.102

172.937

35,2%

37,8%

32,0%

35,5%

2

2

2

Peugeot Pars

10.533

70.228

12,6%

16,5%

18,6%

14,4%

3

3

3

Iran Khodro Samand

7.565

60.328

13,1%

10,6%

13,4%

12,4%

4

4

4

Peugeot 405

6.862

47.010

8,5%

11,1%

12,1%

9,7%

5

6

6

Saipa Tiba

3.130

22.407

3,4%

6,7%

5,5%

4,6%

6

7

8

Iran Khodro Runna

2.836

20.378

3,4%

5,4%

5,0%

4,2%

7

5

7

Peugeot 206

2.585

20.732

3,5%

5,8%

4,6%

4,3%

8

9

5

Renault Tondar 90

1.424

37.721

11,1%

3,0%

2,5%

7,8%

9

8

9

Chery MVM315

1.234

10.248

2,6%

1,1%

2,2%

2,1%

10

19

16

Lifan X60

1.018

1.018

0,0%

0,0%

1,8%

0,2%

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