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November
2003 / No. 26 |
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Auto Industry |
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Unprecedented Auto Investment |
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Experts believe that
we have many interesting advantages in Iran as a partner to a foreign
investor and a joint platform sounds quite suitable. |
With the total production of 450,000
cars Iran was ranked the world’s 17th auto manufacturer. Considering the
production capacity, Iran Khodro could become the 23rd and Saipa the 32nd car
makers in the world and there is no other car maker in the region on this
scale, except for Turkey. Therefore, Iran and Turkey are the two largest auto
manufacturers in the region.
Estimations show that the process of car
production is still surging. Iran was capable of manufacturing 530,000 cars in
2002, compared to the 206,000-production capacity in 1998. The big leap was
430,000 cars in 2000 that shrank to 340,000 in 2002.
However, it’s a different story in Iran.
Our markets are protected and the national strategy stipulates that there is
still no room for foreign imported cars, while Turkey is about to join the WTO
and is free of custom tariffs. Car sale and purchase is quite a competitive
action, so global car makers can be seen there.
Experts believe that we have many
interesting advantages in Iran as a partner to a foreign investor and a joint
platform sounds quite suitable. Thus, the contract for a joint platform of
Renault L90 was finalized.
According to the information released by
the Ministry of Mines and Industries, Reza Veyseh the Managing Director of the
Industrial Development and Renovations Organization (IDRO), and the Managing
Director of Renault-Nissan Company signed this contract, which can be
considered the largest foreign investment in Iran’s automobile industry. This
contract stipulates the annual production of 200,000 C type cars from March
2004. This amount is supposed to climb to 500,000 by the year 2006.
When this contract comes into effect a
company will be established that will be owned by both IDRO and
Renault-Nissan. This Franco-Persian company will then grant Iran Khodro and
Saipa the permission to produce L90s. This contract is predicted to have the
additional effect of connecting Iran to the global parts manufacturing chain.
The Franco-Persian company will be permitted to issue licenses for L90 in its
later stages. The company will also be relying on Iran Khodro and Saipa to
provide the necessary after-sales-services.
It is said that L90 is a five-seat
passenger car produced by Iran Khodro and Saipa companies in 4 to 6 different
models with engine capacities varying from 1300cc to 1800cc. The price at the
time it is produced is supposed to vary from 40 to 80 million rials (5,000 to
10,000 dollars).
Samand project as a design experience
has qualified our car makers for designing more car bodies. Today’s global car
making industry has focused on this and any transaction, production capacity,
mergers, and exports are based on this matter because designing and
manufacturing a body is regarded as the ID for that car.
The new contract is focused on
technology transfer and purchase. In this way, L90 will probably be able to
stop worries about the domestic market and the process of car imports. It is
predicted that presenting a new car can help the qualitative and quantitative
questions faced by Iran’s auto making industry. The new project for a joint
platform is supposed to start with assembling, and should it be economical,
will be switch to domestic parts.
In order to establish and develop a
platform to manufacture a new car, a total investment of at least $1 billion
is needed, and the turnover requires at least one million cars manufactured
which itself takes at least 10 years, regarding the current situation of the
market. This lengthy period is equal to the estimated useful age of a car. On
the other hand the costs for designing and manufacturing a new car are much
more than being economical and the only solution to this problem is to join
the global chain of production.
Car Production to Increase 53%:
Official reports indicate that
car production capacity has increased during the first four months of the
Iranian year (21 March to 21 July 2003). According to the reports, the amount
of car production has increased up to 53%, the equivalent of 215,000 cars,
though the total amount of production can be estimated by the second half of
the year.
Compared to the same period last year,
estimations show a 54% growth for passenger car production i.e. 192,985 cars
this year, 40% increase for pick-ups, which is 15,805 pick-ups, and 102% boost
for 4WDs equaling 564. At the same period, minibus production decreased by 20%
and the production of ambulance and vans were boosted by 217% and 68%,
respectively. The production growth also included commercial vehicles such as
buses and trucks, and they accordingly showed 23% and 48% growths.
Paykan:
Though the production of this passenger car has been always chalking up, its
production fell to 12,000 cars this July. This was of course due to the new
strategies acquired by the car making industries. However during the
above-mentioned four months, production of Paykan reached 49,500, which was
12% above the production rate during the same period last year.
Pride:
The hasty production of Pride passenger car, 19,000 cars in July, proves the
possibility that the amount of cars produced by Pride can exceed that of
Paykan by the end of this year.
Peugeot RD:
After its production shrinking due to some technical problems, it could
successfully retain the third rank among other produced cars this year and
with the amount of 16,190 units, it hit the last year production capacity for
5.5%.
Samand:
During the first quarter of this year, Samand production (a product of Iran
Khodro Co) has risen to 6.5% i.e. 16,380 cars. This passenger car occupies the
fourth place compared to the other Iranian produced passenger cars.
Peugeot 405:
Another product of Iran Khodro Co is Peugeot 405 that is given a high
capacity. With the 90% growth in production, the number of produced 405s
reached 15,447.
Peugeot 206:
In spite of the 25% production boost in the first three months of the year,
Peugeot 206 is still behind the schedule announced by Iran Khodro Co.
Peugeot Pars:
It seems this product of Iran Khodro has been quite successful in increasing
its share of the market. At the moment, the price is about 30 million rials
more than that of Samand and Peugeot 405. The production capacity for this
Peugeot has also boosted up to 7,421 cars, the equivalent of 38%.
Sepand (Renault 5):
Though it is experiencing a falling production capacity due to its low quality
and the low demand, it has enjoyed a slight growth.
Daewoo:
Following the limitations imposed by General
Motors Company, the production of Daewoo Cielo and Matiz has also witnessed a
reduction. With the total production of 1,656 Cielo and 99 Matiz, their amount
of production falls by 70% and 96%.
Luxury cars:
The production of Mazda, Maxima and Xantia has reached 1,069, 719 and 1,228
cars. These numbers each indicate 76%, 14% and 102% growth. The total share of
luxury cars from domestic market is estimated to be less than 2%.
Pick-ups:
With the total production amount of 15,805 pick-ups in the first four months
of the year, which indicates a 40% growth, the production of Paykan pickup
shrank by 1% compared to the same period last year, and the production
capacity of Mazda and Zamyad accelerated by 203% and 77% from April to July.
Minibuses:
Due to low demand, the production of minibus has recently declined from 234
minibuses from April to July last year to 168 in the same period in the year,
which are all manufactured by Iran Khodro Diesel.
Buses & trucks:
With a 33% increase, bus production climbed to 1,335 buses during the four
above-mentioned months. At the same time the production of trucks, which are
mostly manufactured by Iran Khodro, has also edged up by to 48%.
Parts Manufacturing
Dr. Manteghi Iran Khodro’s Managing
Director said the part making industry needs to speed up and accompany the car
making industry in joining the global markets. We need to analyze the current
situation of these industries, point out the necessities and present suitable
macro strategies in order to join the process of globalization.
Competitiveness, sound managerial system, human resources development,
internalization of quality system and production standards, after sale
services and marketing are considered as some of the prerequisite macro
strategies to globalization. Dr Manteghi also added that part makers have to
think of declining their prices as car makers do, and with on-time delivery of
their products raise car makers’ trust.
Dr. Manteghi asserted "Having Iranian
car makers in global markets will lead part makers to the same markets as
well. And that’s why they need to improve and develop their capabilities in
order to be able to face global part makers. High quality parts will end in
high quality cars so we want our part makers to do their best."
The Managing Director of Iran’s Part
Making Association declared, "We are going to establish a three dimension
committee that includes IPMA, SAPCO and Sazeh Gostar." The committee is
supposed to head for an annual capacity of 1.2 million parts, which is of
course officially announced to the policy-making headquarter for cars. On the
other hand, coming up with foreign joint ventures will result in technology
transfer and this is regarded as the basis for discussing joint platform with
French car makers. However part makers need to work on low price and high
quality parts, and establishing exports stations.
Dr. Rejal also mentioned, "The contract
between part makers and car makers is proceeding and the 40 month contracts
are hope giving. However part makers were required to regard the changes of
the foreign exchange rate in their contracts."
Hadi Ghanifar, the chairman of the
central counsel of Iran’s Mines and Industries Houses emphasized, "Some of the
economic authorities of the country emphasize car imports and try to weaken
domestic production without having the required knowledge. The fluctuation of
the exchange rate will harm the country’s economy. The amount of imports
reached $25 billion during the last year or it can be said we have consumed
other countries’ goods worth this much and with each dollar’s value increasing
1000 rials we have consumed 2% more."
Ghanifar also criticized the 26% to 27%
interest of the governmental bank loans for manufacturing sections and added,
"The bank interest rate of loans is kept low in all developed countries while
it is still high in Iran." |
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CURRENT ISSUE |
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Nov. 2003 / No. 26 |
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