Significant Surge in Car Production in Iran

"The International Organization of Automobile Manufacturers" reported on Wednesday, March 4, that car production in Iran increased by nearly 47 percent in 2014 compared to the previous year. Reza Valizadeh from Radio Farda inquired about the reasons for this increase from Fereydoun Khavand, an economist based in Paris: Fereydoun Khavand states in an interview with Reza Valizadeh that the "International Organization of Automobile Manufacturers," headquartered in Paris, announced in its report on Wednesday that Iran produced 1,090,000 passenger and commercial vehicles in 2014, marking a 47 percent surge and placing it 18th among global car manufacturers. According to the same organization, over 87 million vehicles were produced worldwide last year, with China being the top producer, followed by the United States and Japan. The main reason for the dramatic increase in car production in Iran in 2014 was the provisions included in the nuclear agreement of November 2013 in Geneva between Iran and the "P5+1" group, which led to the suspension of sanctions on this industry and its related services. However, it should not be forgotten that despite the surge in car production in 2014, Iran is still far from its peak production level four years prior. In fact, after the imposition of sanctions, car production in Iran fell from 1.6 million in 2010 to 1 million in 2011 and below 500,000 in 2012. Currently, the Iranian automotive industry still suffers from sanctions, particularly in the banking sector, which is why production has not yet returned to previous levels. What impact does the 47 percent surge in car production in Iran have on the overall Iranian economy? The impact of this surge is very significant for the entire Iranian economy. Official statistical sources in the Islamic Republic reported a 4 percent growth in Iran's GDP in the first half of the current year. Expert studies indicate that nearly 67 percent of this 4 percent growth is attributed to the automotive sector, with 33 percent coming from other industrial activities, which are mainly large units. This is why the impact of the 4 percent growth is not seen in small and medium-sized enterprises, which are still grappling with severe recession. What is the outlook for the Iranian automotive industry in the coming months? The experience of sanctions has shown that the automotive industry in Iran is heavily dependent on foreign partners, especially the French, and the parts they provide. When Peugeot and Renault halted their cooperation with Iranian automakers due to sanctions, the country's production dropped by a quarter. The same situation is expected in the future. Several of the world's major automakers are waiting for the end of sanctions to engage in extensive cooperation with Iran. However, if Iran's nuclear negotiations do not yield results this time, the anticipated suspensions in the Geneva agreement will also come to an end, and there is a risk that car production could once again fall to 400,000 units per year.