Increase in Car Production in Iran; Unproductive Contracts with Foreign Companies

Despite financial crises last year, car production in Iran has increased and has reached the level of production before the severe nuclear sanctions in 2011 for the first time. Car production last year grew by 13.7%, rising from 1,350,377 units in the 12 months of 2016 to 1,534,000 units in 2017. According to ISNA, the production of various passenger cars also increased by 14.8%, from 1,255,211 units in 2016 to 1,441,577 units in 2017. In the 12 months of 2017, the production of various vans increased, but the production of pickups decreased. Last year, the production of various light trucks, heavy trucks, and tractors also saw an upward trend; however, this production capacity does not seem sufficient for Iran's needs. Despite the growth in passenger car production, this sector still witnesses the production of outdated vehicles, and contracts that were supposed to yield results after the JCPOA have largely remained unproductive after two years. Renault, which was supposed to produce two new products, the new Renault Duster and the new Symbol at the Benro factory, has not yet succeeded in obtaining this factory from Saipa, as Saipa is still unwilling to transfer this factory to Renault. If the Benro factory is transferred, at least two years will be needed to produce Renault products. Among the vehicles for which production contracts were signed in Iran after the JCPOA, only the Peugeot 2008 has been produced. The production volume of this vehicle is also very limited and does not even account for one percent of Iran's automotive industry production. Nevertheless, Iran Khodro and Saipa continue to produce vehicles whose technology mostly dates back 30 years. After the JCPOA, South Korean, German, and French companies were supposed to invest in Iran's automotive industry. Among these companies, only Peugeot and Citroën have so far fulfilled their promises. Production of the Peugeot 2008 began in 2017, and production of the Citroën C3 will also start in 2018. Apart from these two companies, Kia Motors, a long-time partner of Saipa, has not been willing to cooperate with its Iranian counterpart. Renault has so far failed to meet its commitments and only produces outdated vehicles like the first-generation Logan and first-generation Sandero in Iran. Hyundai is also assembling its vehicles in Kerman on a limited basis. In contrast, Volkswagen, which intended to produce extensively in Iran, has so far only agreed to import a limited number of Passat models to Iran. In this situation, the Iranian market is dominated by Chinese automakers, and these companies produce their products as fully assembled in Iran.