Rouhani seeks to turn around Iran's auto sector
Despite President Mahmoud Ahmadinejad's raising car import duties to 90%, domestic manufacturers have struggled with low-quality cars, resulting in high layoffs.
TEHRAN, Iran — On Feb. 18, Ali Ali-lou, a member of the Iranian parliamentary Industries and Mines Committee, said Iran was planning to cut car import tariffs to zero in two year’s time. He said the measure was necessary to boost domestic production and make the auto industry competitive with its counterparts worldwide. The lawmaker urged the government to abandon support for the struggling sector, whose products are largely criticized in Iran for low quality and high prices.
The automobile industry, the biggest non-oil sector in the Iranian economy constituting around 10% of gross domestic product (GDP), boomed over the decade ending in 2011 due to the backing of the government and the absence of international rivals. The administration of former President Mahmoud Ahmadinejad increased car import duties as much as 90% last year, a measure that experts believe led to a marked deterioration of quality in the Iranian market monopolized by three major car manufacturers: Iran Khodro, Pars Khodro and Saipa.
The domestic carmakers are asking the new administration to not only keep the tariffs high but also bail them out to save the sector, which owes local banks as much as 100 trillion rials ($4 billion).
In the fiscal year ending March 2013, Iran’s vehicle production fell to 920,000 units, down from 1.65 million in the previous 12 months. Over the past 11 months, production has declined even further to about 655,500 due to external shocks, stemming from the intensification of trade and financial sanctions since 2011, coupled with macroeconomic and microeconomic mismanagement.
