Iran Ranks 20th in Global Car Production; Several Ranks Drop in 2015

Iran has fallen several places in the global automotive ranking, reaching the 20th position among car manufacturers in the world in 2015. The main reason for Iran's decline is the reduction in car production in the Iranian automotive industry in 2015 and the growth of several emerging countries in car production, including Indonesia and Slovakia, as well as the significant growth of the Italian automotive industry. According to the Global Automotive Manufacturers Association report in 2015, China ranked first with the production of 24.5 million cars, the USA second with 12.1 million cars, and Japan third with 9.278 million cars. Among these three countries, the US automotive industry experienced a 6% growth, China a 3% growth, and Japan faced a 5% decline in production. It seems that in recent years, following the economic crisis in the US, the automotive industries of that country have managed to return to the global competitive arena with structural reforms during Barack Obama's presidency and with government assistance. Following these three countries, Germany produced about six million cars, South Korea about 4.5 million, India 4 million, Mexico 3.5 million, Spain 2.7 million, Brazil 2.4 million, and Canada about 2.3 million cars, ranking fourth to tenth. In the 11th to 20th positions are France, Thailand, the UK, Russia, Turkey, the Czech Republic, Italy, Indonesia, Slovakia, and Iran, respectively. The highest growth among these countries belongs to Italy with 45% and Spain with 13%, indicating an increase in production capacity and recovery from economic recession after several years of financial crisis. Conversely, the highest decline in production is attributed to Russia with 26% and Brazil with 22%. Iran has also faced a 10% reduction in production among the main car-producing countries in the world. The shock and widespread recession in the car market, followed by sanctions on the purchase of new cars, which were ultimately broken by government loans, are among the factors evaluated for the reduction in car production last year. The market recession has been the main reason for the decline in car production. This recession reached a point where four ministers referenced it in a letter to the president, stating that over 100,000 cars were stored in automotive companies, and financial statements showed accumulated losses equivalent to 200 billion tomans for the automotive industry. However, with the provision of low-interest loans by the government, this crisis temporarily subsided, and the automakers' warehouses were emptied of cars. From June 2015, the second half of the year, the car market gradually entered a recession. Although many expected demand for car purchases to increase with the start of summer, the market awaited the outcome of nuclear negotiations, which continued into July. With the beginning of August and considering Iran's agreement with the 1+5 group, many hoped that people would turn to buying cars, but news of agreements between Iranian automakers and major Western companies like Benz, Peugeot, Renault, Volkswagen, and Fiat for the production of new cars shocked the market. Some customers held back to wait for new cars to enter the market. On the other hand, a social movement emerged to boycott the purchase of new cars in protest against the low quality and high prices of Iranian cars. These factors led to about 80,000 cars accumulating in automakers' warehouses over two months. Following this event, car production, which was hoped to reach around 1.5 million units by the end of 2015, slowed significantly. As the scope of this recession widened, the government took action, and Mohammad Baqer Nobakht, head of the Management and Planning Organization, announced that the government had allocated about 200 billion tomans in subsidies for production, part of which would be provided to the automotive industry. This government assistance was proposed in the form of a 25 million toman loan, which ultimately broke the ban on purchasing new cars. Although this loan managed to alleviate the crisis for automakers in selling their cars, the shock of recession and sanctions was so great that car production, which was expected to grow compared to 2014, actually decreased. Saeed Leilaz, an expert close to the Iranian automotive industry who has also been the sales manager of Iran Khodro Diesel, stated, 'If you look at the statistics, you will find that people's purchasing power has severely decreased since 2011, and its recovery will take at least until 2019. Between 2010 and 2013, people's purchasing power decreased by 40 to 50 percent. In such circumstances, you see that even people cannot afford to buy a Pride. Of course, I mean the lower to middle-class segments of society.' According to Mr. Leilaz, 'The middle class has also weakened due to the recession that has occurred in the country, and their income level has reached a point where they are unwilling to spend on buying a car.' Despite the experience of 2014 and 2015, the Iranian automotive industry hopes to reach a production target of 1.5 million units in 2016. If Iran can achieve this goal, it can join the ranks of the top 15 car manufacturers in the world. The Iranian automotive industry hopes that with new investments and new contracts with foreign companies, it can increase its production to around two million units over the next few years. However, it is predicted that the Iranian market will not have a capacity of more than 1.5 million units per year. For this reason, the Iranian automotive industry has included a clause for at least 30% exports in new contracts with foreign companies to increase Iran's car exports to about 500,000 units per year.