Iran automotive advantage assessed

Hashem Yekezare, chief executive officer of Iran Khodro, has talked about the importance of investment in the car industry.

Speaking on the sidelines of Iran’s annual auto show in the capital Tehran, Yekezare highlighted the situation of his company and the wider industry, ISNA reported.

Referring to population growth and purchasing power as major indexes for car demand, he said population growth is negative in developed countries hence car demand has declined despite their higher purchasing power.

Yekezare noted that in underdeveloped countries, despite high population growth, low purchasing power hampers car demand.

“We have positive population growth and our economic development has made it possible to have cars. Hence, the rational direction for car industry investment will be toward these countries,” he said.

The head of IKCO, Iran’s largest state-run auto manufacturer, further said developed countries purchased 66% of all cars in 2005 which declined to 46% in 2014, while developing nations purchased 34% of cars in 2005 which rose to 53% in 2014.

“Interestingly 47% of these were sold in BRIC countries, namely Brazil, Russia, India and China, as well as the Rising-15 countries,” he said.
Iran is one of the Rising-15 countries and expected to post high economic growth in coming years.

Regional Growth Chart

Yekezare said statistics show gross national product and foreign direct investment in these countries are rising.

The IKCO chief also spoke about the economic indexes in Middle East and countries of the Commonwealth of Independent States, and said the region has 575 million people while Iran has 30% of production and 40% of car sales, which shows that the car industry could be a suitable investment avenue for global automakers.

Iran ranks second in terms of population, third in gross national product and first in car sales in the region.

“Iran and Turkey have the highest car production in the region with an annual need for 4,400,000 units, of which 700,000 are produced locally and 1,700,000 are provided by global automakers,” he said.

Yekezare said Iran has direct sea and land access to all 15 countries of the region, in addition to high security, cheap electricity and favorable auto parts making capacity.

“With over 79 million people, Iran has rich energy resources and industry has a 25% role in its economy, of which only 2.7% are reserved for auto industry but is projected to reach 4.1% in 2025,” he said.

Iran has the capacity of producing 2,150,000 cars annually, which will reach 3 million in 2025. Since 1966, when car manufacturing started in Iran, 19 million cars have been sold here, with 93% of them produced locally, which shows the high share of local producers in this market.

Car and parts sales in Iran had a total value of $23 billion in 2014. He added that “a major part of these sales was for commercial cars and we expect it to rise to 45-50 billion in 2025”.

Production Growth

Yekezare further said Iran ranked 20th in car sales in 2014, but will likely rise to 13th this year.

“At the end of last year, we had 17 million cars in Iran, of which 6 million had been produced in the last five year. This shows that we will have over 10 million cars with over 15 years of age, which need to be replaced—meaning one million replacement annually,” he said.

“IKCO produces 600,000 cars annually and ranked 25th among major automakers in 2014. Since its foundation, this group has produced 9,500,000 units, of which 800,000 were produced in 2012—constituting 54% of national production.”

IKCO has increased its share of national car production from 47% in 2012 to 54% in 2014.

Yekezare noted that IKCO and parts makers have gained the ability of designing all car parts, except the platform, and also have the required facilities.
“Leadership in local market with a share of 54%, modern production lines and facilities, a vast network of sales and after-sales, expert personnel, strong parts-making chain, high production capacity and a history of cooperation with major global companies are the main potentials of IKCO,” he said.

By Financial Tribune