Iran Automotive Industry: Opportunities and Challenges
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Director General of Industrial Export Bureau,
Iran Trade Promotion Organization
Former commercial counselor of Iran in China
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The Automotive Industry
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Economic Sanctions had a serious effect on automotive industry,
especially at the time when the industry was ready for major expansion.
Before economic sanctions were imposed, Iran was the largest car
producer in the Middle East
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Increasing share of joint venture and technology transfers has resulted in
the improvement of local content
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2. Market Structure
Regarding passenger cars, there are 6 auto maker
companies, 2 of which account for 92 percent share of
the auto market.
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Iran Khodro Disel, Saipa Disel account for 89 percent the
total domestic production in commercial vehicles and the
remaining 11 percent is belong to 13 companies
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Increasing share of joint venture and technology transfers has resulted in
the improvement of local content
International Cooperation in
automotive (2015)
China
ranks 1
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as Iran’s most important partner. It
contributes to 36 percent
license contracts in Iran with a local content ranging between 14-26 percent.
Korea
has the owns second largest share in Iran's international license
contracts (26 percent) with the local content ranging between 14-87%.
Source
: Ministry of industry, mine and trade
Combination of
License contracts:
Passenger cars
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Joint ventures and partnerships are the most
popular go-to-market strategies used by
major players in Iran’s auto industry.
We are Looking for win – win cooperation
framework, while the limitations ( such as
banning the importation of foreign cars as
well as KOMEHO tire) on foreign trade
shows the new approach of the government.
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3. Opportunities and Challenges:
of IRAN auto industry
3. Opportunities
3. Opportunities (cont)
Low base effects, pent up demand, and consumer
preferences for foreign brands will drive growth in the
automotive market.
Foreign brands continue to show interest in local sales
and/or production, with Daimler, VW, Skoda, Fiat and
Peugeot among the brands reportedly in talks to enter the
market.
3. Opportunities (cont)
3. Challenges
4. Iran and Korea bilateral trade and
economic relations
in auto industry
Korean Brands Auto Sales in Iran
Market 2015-2016
Korean Brands market sales increased 35% in 2016 near to 320
thousands automobile
Source
: Ministry of industry, mine and trade
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With Many
Thanks
mkamali
1
@yahoo.com
The automotive industry in Iran plays a significant role in the country's economy, with strong backward linkages to various sectors. Despite facing challenges like economic sanctions, there are opportunities for growth through international cooperation and technological advancements in auto parts production.
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Presentation Transcript
Iran Automotive Industry: Opportunities and Challenges 5thKorea Iran Cooperation Forum Sep,2017 Seoul Masood Kamali Ardakani Director General of Industrial Export Bureau, Iran Trade Promotion Organization Former commercial counselor of Iran in China
The Automotive Industry The Automotive Industry contributes to 11.8 % of the total value added in the industrial sector; (2011) provides job for 10 % of industrial labor force, ranking as the 3rdjob generating industry;(2013) Automotive is the Iran s second most developed industry, approx. 3% of the GDP Within 2025 the GDP share is expected to increase to 4%
Strong Backward linkages Iran s auto industry has strong backward linkages with the other economic sectors. It is ranked as the 2thindustry in terms of backward linkages (out of 23 manufacturing industries). The automotive industry can be regarded as one of the key industrial growth movers in Iran
Production of Irans Auto Industry (1000 Units) 1800 1654 1600 1425 1400 1350 1200 1130 1007 1000 800 737 600 400 Source: Ministry of Industry, Mines and trade 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Economic Sanctions had a serious effect on automotive industry, especially at the time when the industry was ready for major expansion. Before economic sanctions were imposed, Iran was the largest car producer in the Middle East
International Cooperation in auto parts Source: http://www.iapma.ir/ Increasing share of joint venture and technology transfers has resulted in the improvement of local content
Auto Part Production in Iran Dispersion of auto part clusters Number of auto part manufacturers in supply chain: 1200 Number of Clusters: 7 Working Capital: 4.5 billion $ Sales (2015): 7 billion $ Share of industrial value added: 9% Investment: 3 billion $ Source: http://www.iapma.ir/
Market Structure for Passenger Cars (2015) Regarding passenger cars, there are 6 auto maker companies, 2 of which account for 92 percent share of the auto market.
Market Structure for Commercial Vehicles (2015) Iran Khodro Disel, Saipa Disel account for 89 percent the total domestic production in commercial vehicles and the remaining 11 percent is belong to 13 companies
International Cooperation in auto parts Source: http://www.iapma.ir/ Increasing share of joint venture and technology transfers has resulted in the improvement of local content
International Cooperation in automotive (2015) Combination of License contracts: Passenger cars Source: Ministry of industry, mine and trade China ranks 1stas Iran s most important partner. It contributes to 36 percent license contracts in Iran with a local content ranging between 14-26 percent. Korea has the owns second largest share in Iran's international license contracts (26 percent) with the local content ranging between 14-87%.
Irans International Cooperation in Auto Industry Foreign Partner Type of cooperation Year of contracting Products France (Valeo) product sharing contract, 51% various types of auto parts including 405, 206 and Samand 2004 Germany (Daimler) Production of Mercedes-Benz trucks with Iran Khodro Diesel and Mammut Group Joint Venture 2016 production of 208, 301 and 2008 models, with an annual production capacity of 100,000 units with IKCO 30% of production will be export France (Peugeot) Joint Venture 2016 development of a modular automotive platform, able to underpin at least four different vehicles including a medium segment passenger car Italy Joint Venture 2017 (Pininfarina) to design and manufacture a turbo straight-three engine to reduce the technological gap between Iran s automotive industry and its counterparts. Germany (Mahle) Joint Venture 2017
Joint ventures and partnerships are the most popular go-to-market strategies used by major players in Iran s auto industry. We are Looking for win win cooperation framework, while the limitations ( such as banning the importation of foreign cars as well as KOMEHO tire) shows the new approach of the government. on foreign trade
IRAN Investment Policies and requirements for foreign auto makers 40% Local Content Requirement at the first year of the production, Export of at least 30% of the production to the foreign markets, Know how transfer as well as establishing R&D Center required.
3. Opportunities and Challenges: of IRAN auto industry
3. Opportunities The strategic goals set for automotive industry in horizon 2025 To produce at least 3 million units, 2 million for domestic market and 1 million for export; To produce at least 50% of light vehicles with local brands; To have at least $25 bn worth of parts and components for domestic cars supplied by local producers; To have at least $6 bn worth of auto parts and components (production lines and parts) exported by local producers To produce at least 120000 commercial vehicles, 90000 for domestic market and 30000 for export
3. Opportunities (cont) Market Potentials and Proximity: Vast domestic market with a population of 78.1 Million growing steadily as well as quick access to neighboring markets with approximately 300 million inhabitants. Foreign brands continue to show interest in local sales and/or production, with Daimler, VW, Skoda, Fiat and Peugeot among the brands reportedly in talks to enter the market. Low base effects, pent up demand, and consumer preferences for foreign brands will drive growth in the automotive market.
3. Opportunities (cont) Using old platform and being ready to use new platforms in order to manufacture modern autos according to costumer taste Availability of required conditions for entrance of Non Chinese companies in post-sanction period to supply original parts. Under sanctions autos imported as CKD or domestic cars produced by using Chinese parts. Higher custom duties on CBU and thus increase in final cost that leads to increase in tendency for CKD import and CKD parts
3. Challenges large number of auto part manufacturer without economic scale and access to tier1. Concentrated market automotive market Complicated Private Public Structures in many companies (for example 80 percent of Iran khodro s stocks belongs to 14 companies with private public stockholders). Price regulation made by competition council structure for
4. Iran and Korea bilateral trade and economic relations in auto industry
Korean Brands Auto Sales in Iran Market 2015-2016 Source: Ministry of industry, mine and trade Korean Brands market sales increased 35% in 2016 near to 320 thousands automobile
Company name Hyundai Kia total Auto importation(unit) 17398 11096 28494 Market share(%) 28.4 18.16 46.2 In 2016, around 46 % of imported cars was belong to Korean brands Company name Hyundai Hyundai kia Production (unit) 198 835 13197 Auto Brand Local partner i10 i20 Cerato Kerman khodro Kerman khodro Saipa Korean brands production inside Iran are less than 1% of total auto production
Ongoing cooperation of Korean and Iranian companies in auto and auto part section Korean company Iranian company Field of cooperation Hyundai Power Tech & LGE Co. Iran Khodro Gear Box instalment fuel consumption Optimizing Tenergy Iran Khodro Ministry of industry, mine and trade Joint production of CV Under negotiation Hyundai Electrical cars and related equipment's such as battery LGI IDRO
Priorities of cooperation with Foreign auto makers Balanced development of automotive industry value chains from auto part production to after sale services, Enhanced cooperation with leading global companies in the form of joint venture (not just license) and emphasis on export, increase depth of local content. local content requirements in new joint venture contract increase to 40% Finally, Enhanced outward orientation in auto industry and its participation in Global Value Chains (GVC s).
With Many Thanks mkamali1@yahoo.com
