Iran to produce 1.3 million cars next year despite US sanctions
Iranian automakers will manufacture more than 1.3 million cars next year, marking a 50 percent increase in production in the face of US sanctions, a deputy industry minister says.
Iran Khodro (IKCO) and Saipa are the two largest local manufacturers, which have picked up the slack since France’s Peugeot and Renault exited Iran along with other international companies in the wake of US sanctions in 2018, creating a supply crunch which saw car prices vault to unprecedented highs.
As the fallout from the sudden exit of foreign companies began to roll in, the two car makers pooled up local manufacturers of parts to produce Iranian-made vehicles. The defense ministry joined in to manufacture hi-tech auto parts which Iran used to import.
According to a local auto maker, 154 major auto parts have been internally produced, saving the country some 400 million euros in foreign exchange.
“To internally produce auto parts, we have started 82 in-house manufacturing projects with the Ministry of Defense and knowledge-based companies and the Vice Presidency for Science and Technology,” Saipa CEO Seyyed Javad Soleimani said Tuesday.
More than 100,000 people are employed by IKCO and Saipa, while another 700,000 Iranians work in industries related to car manufacturing. The auto industry is only second to Iran's energy sector, accounting for some 10 percent of the gross domestic product and 4 percent of employment.
When the Trump administration reimposed sanctions on Iran in August 2018, it reserved Washington’s first hammer blow for the car industry to hurt as many Iranians as possible.
Ironically, the US pressures helped domestic manufacturers thrive under the new situation through mobilizing their resources to fulfill some of the tasks which were an exclusive competence of foreign companies.
Local manufacturers are now producing a wide range of parts such as automotive immobilizers that allow the engine to start only with the vehicle's authorized key, electronic control units, oxygen sensors, electric seats, electric steering, six-speed automatic transmission, polymeric materials, modulators, injectors, airbags, multimedia, direct current (DC) motors, all types of electrical sensors and digital front amplifiers.
The K132 sedan, the first Iran-made car using 90% locally-manufactured parts, is about to roll off the IKCO’s mass production line in February. IKCO's rival will produce Saipa Shahin compact sedan, which is 92% reliant on locally-manufactured parts.
However, Iranian manufacturers are worried that a possible opening in Tehran's ties with the West after Trump leaves office could lead to the return of foreign car makers and send them back to square one.