Friday, August 19, 2011

Iran's Auto Industry, created out of a need

by Amir Taheri

It employs over 500,000 people in production. It has grown to being between the 15th to 20th largest of its industries in the world. This years total production will be an all time high of 1.5 million. Iran's auto industry as described, has achieved much but still has much to aim for. It is similar to the French in many ways. It has had government protection that has smoothened its way to success by pushing out cheap foreign competitions that would be the death of it. It has also had French industrial support for the better part of 20 years. In comparison the British auto industry with almost no government protection is now either out of business or been sold off to foreign competitions.

Yet it still has much to improve upon including offering more options but today Iran's auto industry is also producing indigenous products, parts, and options as good as most of its competitors world-wide are offering. Iran's first home made car was the Samand. A car spiced and altered from the original Peugeot 405, now has served as the basis for its own Iranian creations. Iran Khodro the maker of the Samand and at times Iran's largest car producer, is the major driving force for innovation and new products in Iran. Producing for years the gas guzzling Paykan, based on the old British 1967 Hillman Hunter, now has ended and I have heard rumors that the whole line has been sold to Sudan, for further production. More recently, Iran Khodro, has been expanding production across Iran as part of a multi-aimed goal of both expansion and decentralized production. Whereas in the past, quantity had been the number one priority, in recent years, major efforts of improving quality have been undertaken to compete both in Iran better and also in the competitive international market.

The mid 90's was when for Iranian decision makers the realization came that Iran needed to have a strong auto industry. Starting around 1991, Iran for the first time after the revolution opened its market partially to foreign imports. It was a disaster. Coming after the end of the Iran-Iraq war, and the heavy reconstruction that the country was going through, demand for everything new was growing. It was in these years that Iran, experienced its first post-revolution debt crisis. Imports grew faster than oil and non-oil exports could keep up creating a hard currency shortage. Raking up billions in dollars of debt, something had to change. The largest burden on imports was foreign auto imports. It was now that Iran had to take a new direction, Iran simply could not afford the baby boomers buying now foreign cars. Imagine an import bill for importing 500,000 cars at an average price of $15,000, translating to $7.5 billion. This when $20 billion was the peak of all of Iran's imports. Imports were banned apart from the occasional personal automobile brought back from time living abroad. This was the time, as already mentioned, that year after year, quantity was the focus of Iran's major auto producers, Iran Khodro and Saipa. Joint venture deals were signed with French and Korean car companies to meet demand and share technology.

Fast-forward to today where Iran Khodro and Saipa, the two largest players are not only producing each around 750,000 cars, buses, and trucks in Iran but also have started plants in Egypt, Syria, Russia, Venezuela, and Senegal. Smartly each of these joint ventures have been produced on altered local names, and opened the market of neighboring countries for further exports. Since each of these countries operates in its own trade groups, these cars can be further exported to neighboring Asian, African, or European markets with minimal import taxes. The Samand is heavily popular in Senegal and Venezuela for its quality versus its price. One other important thing that third world countries require to become buyers of foreign cars is a constant supply of of spare parts. Easy maintenance has also made these cars popular in these countries. Both of the major players have big plans to expand in these countries with further improvements in quality and price.

Apart from producing cars based on foreign models, the new wave of innovation and changes have become more indigenous. After the original Samand came the Soren, that has more modern features and things that one finds in a new model in foreign countries, including navigation, rear entertainment systems, and laser guidance. A newer model has started being produced called the Runna. This again is an even more up to date automobile not too different than any product made by the big players. It is based on the Peugeot 206 Sedan. The 206 Sedan was an Iranian invention created with an investment of $250 million yet maintained the Peugeot name. Sold also in Europe by Peugeot, Iran Khodro called foul and started the Runna program to take their investment and translate into a return for Iran Khodro. Recently, the new Dena has also been introduced which if quickly mass produced can be a large revenue generator for this company. Having features similar to BMW, and sporting all the comforts of luxury cars on the market this car can start the next phase in Iran's auto industry. In the next 5 years, there are plans for a further 7 models. An SUV and pick-up truck are also to be introduced soon. Saipa, the other major competitor has introduced the Tiba, its first Iranian creation and will replace the Pride Kia. This car also has modern features and curves.

Foreign cars have also made a come back in recent years but not without a 90% import duty. This has meant that one either sees higher end German cars or less expansive Korean cars. One only has to walk past Jewelry shops, or other high earning businesses to see Mercedes SLKs or BMW 5 and 6 series parked outside their businesses. The Koreans also with their improved quality have taken a large market share and look to take even a higher percentage once import duties come down. After the Korean imports, Japanese autos are next in line with the major player being Toyota and Lexus, also part of the Toyota family. Modern joint ventures also provide for Mazda, Suzuki's, and Citroen productions.

Further quality needs to be improved and variety of local cars produced increased for a successful auto industry. A suggestions that I could also make is reduce the duty on luxury cars without removing the heavy duty on cars competing with Iranian productions. This way the huge market of consumers already buying Japanese and Korean cars but currently paying as much as if they were buying a Mercedes, BMW, or Lexus can instead receive value for their money by switching to buying luxury cars. This will also further motivate local companies to provide luxury quality standards in their productions. Created out of a need, and providing hundreds of thousands employment, Iran's auto industry can expect a bright future ahead but needs to keep its foot on the gas peddle (pardon the pun) to join the top 10 auto producing countries.

Editor’s Note: Amir Taheri is one of the authors of Uskowi on Iran. His weekly columns appear here on Fridays.


Anonymous said...

fabulous news that iran is adding a million and a half more vehicles to the more than 800 million already being operated.

perhaps the vibrant and innovative Iranian manufacturing sector will be producing nuclear-powered cars and trucks as an off-shoot of their nuclear non-weapons program.

Anonymous said...

Samand Soren Dena they are all the same Peugeot 405 platform which is 26 years out of date.Then we have Runna a Peugeot 206 model which is over 11 years out of date and still not in production.
How long are they going to milk us on these old models?

Anonymous said...

lol @ that commercial

Anonymous said...

----"How long are they going to milk us on these old models?"---

probably as long as you still have milk or until Stontium 90 starts showing up in it.

Anonymous said...

Mr. Taheri is more knowledgeable about economics and global trade/finance than I knew.

Ironically, what Iran did in 1991 is EXACTLY what the US needs to do right now.

Anonymous said...

Samand Soren Dena they are all the same Peugeot 405 platform which is 26 years out of date.Then we have Runna a Peugeot 206 model which is over 11 years out of date and still not in production.


You do not know what you are talking about. The automotive industry is a MATURE industry meaning that there are no rapid technological improvements. As classic car buffs know there are probably quality decreases. I have a classic car that is far superior to the pieces of crap they put out today. The technological improvements in cars include things like automatic transmission, ABS and so on all of which are incoorporated into Iranian models.

Persicus Maximus said...

Good read.


Anonymous said...

The two Anons...Anon 12:02 AM.. If you mean Strontium I had some 32 years ago and sorry to say I have become immune towards it.
Anon 12:19 AM..I do know what I am talking about and own a classic car but those cars are no classics just old excuses.

Anonymous said...

Some of you are just an embarrassment
Same jack a.. That flame
You absolutely have no idea what you are talking
Having more experience in the automotive than most have been alive these new designed and built Iranian cars
Are not far behind the Koreans , Iranian auto industry
Is doing a great job thanks to our engineers
Long live Iran

Anonymous said...

Mr Uskowi,
You were very quick to remove a post last week with somewhat similiar language as the last anon. last week (and Mr Taheri was very pleased for it) How about Anon. 21 1.11 am? comment?

Anonymous said...

Anon August 21 1:11 AM
Try not to take things to personally or hold personal grudges its detriment to your health and shows bad character.

Anonymous said...

What a load of nonsense about this so called vibrant auto industry in Iran. Like most other articles from this guy, only propaganda value!

I came back from Iran this week and contrary to what this guy has been claiming you can only access this site “Uskowi on Iran” from Iran using VPN and after borrowing one from someone I read that article about construction galore. The fact is that this guy is not there by his choice but has to content to live in Iran. I guess he lost his old job in KFC or was deported. Anyhow now that the cabaret act is over, good luck to him.

The problem is that IMO this guy must be sanctioned by the regime to tell these stories. First as I said this site is filtered (I do not think IRI has stomach for people reading stuff about the Lleader in this forum!). Secondly, if they find out that he is writing independently on this site he will most probably be shafted.

Anyway back to auto industry. As few bloggers have mentioned that most locally produced cars in Iran are the old French small car copies that went out of production donkeys years ago in France. Samand is the latest one but only taxi drivers, public sector official cars and few police or entezami cars use Samand. The newer version of it as I was in it, has simulated wood panel in vinyl and that is just about improvements that they have made.

There is another car called Pride that lacks so many safety features that I have been told even having a crash in the city can be fatal. Apparently the metal panel is as strong as the tin boxes used for storing cheese!

The major issues with these cars is the amount of toxic fume they create. By 8 or 9AM the weather in the street is so polluted (I am not even talking about Tehran) that you breathe fuel in, full stop. I believe lack of proper exhaust emission is a major factor in pollution in Iranian cities and various diseases associated with it.

So that is what you get in a typical street, variety of outdated locally assembled French models and South Korean ones. You may see few Hyundais and if you lucky you may spot one or two Mercedes or BMW. The most common luxury item seems to be Hyundai 4-wheel drive (mostly in white color) that price around 70 Million tomans around $60,000 for a car that you hardly see in Western Countries and even then cost far less in the West. continued. continued

Anonymous said...


When I was reading that article about construction galore I could not believe the stuff there. The fact is that by various accounts there has been heavy recession in Iran (rokoud) for the past three years, practically in all business sectors (discounting drugs and cigarette smuggling!). This has resulted in many building projects being abandoned and hence the construction galore may refer to abandon ship! The Government policy has not helped either. By building cheap housing on the land often looted from the owners by the councils, the property price has been kept low. In addition, lack of liquidity due to sanctions and rokoud, Rial depreciation against Dollar, increasing cost of raw material and labour has left many traditional “besaz-befroush” mob stranded as they cannot find enough buyers to part fund the projects. Hence you end up with half finished buildings construction abandoned. Banks that are major buyers of prime locations together with shopping center (passage) developers have been told to put a freeze on any new property. So there we go.

The irony is that this guy was claiming that “You read stuff from Western Press (the old IMF report comes to my mind), there I am seeing thing and telling you the truth”. Well, I have been to Iran twice in the past six months and none of the stuff that this guy claims are anything but wishful dream. Under the current regime the gap between rich and poor has widened. There are those that are siphoning money to Dubai and there are those who have to get two jobs to make ends meet, often working in the office during day time and driving taxis in the evening. The government policy has been to fill in the consumer shops with cheap rubbish from China and Turkey, thus creating the illusion that the sanctions have not been effective! This has come in expense of local manufacturers who are closing down everyday as they cannot control expenses and compete. Rather than spending the extra cash from higher oil revenues on infrastructure (oil/gas) or improve the quality of Iranian made products (for example improve the exhaust emission standard) , the money is allocated to cheap imports to keep the masses happy. However, this is also drying up due to gradual lack of available hard currency forcing even some medicines not to be available. Those who sit in the west and read the stuff and feel good are advised to take a trip to Iran and see for themselves. Regrettably their dream will be shattered.

Amir Taheri said...

Last Anon,

Im glad to see you are still reading my "propaganda" after so many weeks. Please don't stop, it would be such a loss if I lose such a valued reader and so devoted to writing comments, at times multiple times in the day.

Take care buddy!

Anonymous said...

Anon 21 August 2:53 PM
You have put it all in a nut shell!
Well done!

Anonymous said...

Dear Tahei,

This is the first comment by me in this forum since July (on any topic) so let us not get excited.

BTW, I read all the notes here including yours. In your case, I suggest that you engage your mind before engaging the keyboard. This is a free forum run in a democratic manner (unlike the environment you live in) and in such form one can be as stupid as he/she wishes. However, it appears to me that you are abusing this privilege. If you cannot stand the heat get out of the kitchen and please stop looking for excuses to justify your own headlines.

Anonymous said...

Annon, August 21, 2011 2:53 PM

Thank you for interesting stuff. It is good to hear an alternative view of what is going on in Iran.

I guess we can get all the so called glossy stuff that Mr Amir Taheri writes from IRIB or Press TV!

Anonymous said...

There have been always deficiencies in Iran industries due to several factors like mismanagement, corruption, etc. however Iranians used to look at everything black and white. You can see Mr. Taheri depicted a very positive side of Iran achievements and others in a very long comment just highlight very negative point about it. Developement of a nation is not an easy job so it's very important to note that doing nothing doesn't get you anywhere. I'd rather to look at half full of the glass as returning to prominent civilization of the world is everlasting will of persians. So hope for doing better deems essential to motivate those who care about Iran.
I'll keep reading of Mr. Taheri's writings. Right or wrong I found it very intersting.

Anonymous said...

Anon August 23, 2011 7:51 AM

What you are reading in this guy's writing is, I am afraid commercial adverstising. If you really want to know about the state of Iran (whether positive or negative), please put your money where your mouth is and take a trip to Iran. The glass half empty or full will be revealed then.

In a free forum everyone is entitled to their opinion including Taheri. However, we have to distinguish between fact and fiction.

As I mentioned before the nature of the environment that he lives in does not allow for any criticism. Otherwise if IRI finds out that he is writing to a forbidden/filtered blog (that is you are not supposed to access it from Iran) through a work-around (VPN that hides your IP), then he will be in deep trouble. I don't have much sympathy for such individual. As I said before he would be better off joing Press TV.

Anonymous said...

Iran will never be a prominent civilization with these idiots in power.

Anonymous said...

---"Iran will never be a prominent civilization with these idiots in power."---

Iran hasn't been prominent in the last couple of thousand years, so these guys, while really vile, aren't the entirety of the problem.

Iran has a great number of first-rate people long held back by third-rate governance...dumping the theocrats, though, is still an imperative.

Anonymous said...

Iran was prominent before the advent of Islam 1400 years ago during Sassanid period.
It also had a chance during early Safavid period as well but was squandered and they introduced the rabble that rule our country today.

Religion should play no part in politics and the economy.
Most mullah's should be defrocked about 99.9 per cent and the new ones must be highly educated and limited in number.
People should be given a choice to chose their religion or non at all.
Men and women should be equal 50 50 in society as well as law.
Everything must be challenged and questioned without fear.
This can only happen after this system is overthrown.

Anonymous said...

Amir Taheri is under pressure to write the yarn about all things roses in Iran.
I feel sorry for him poor soul his just another tool and victim of the wicked regime in Iran.

I pray for his health and well being so when Iran is Free from Akhoonds rule he will practice his trade without fear of reprisals.

blackmanAdam said...


YOU ARE TAKING YOUR HATRED OF THE MULLAS A BIT TOO FAR! when you say Men and women should share opportunities 50 by 50,you are wrong and you are proposing upon THE IRANIAN Nation something that have never been seen anywhere!eg, USA-since independence no Woman president,i have many examples o give you but why do want to elevate Women onto a position which even the CREATOR HIMSELF did not assign them to?

Anonymous said...

to blackmanAdam,

"...but why do want to elevate Women onto a position which even the CREATOR HIMSELF did not assign them to?"

You are one hell of a sick man. Who is the creator here? I guess from the culture you come from there is no respect for women.

Anonymous said...


I am a Iranian you are not.
I live in Iran you don't.
I want Iran to be free from Islamic theocracy you have a Islamist agenda.

Go and preach your rotten Islamist agenda else where this is not a Islamist forum for foreigners to preach to Iranians about Islamism.

Weather you like it or not Islamism
is a lost cause in our country except for a few brain dead minority.
Women in Iran before Islam were equal in the eyes of the law as they were recently before Islamist so called revolution.You obviously
have no respect for women with your primitive idiosyncrasy.

air to air heat exchanger said...

Good read.


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