Iran Nuclear Agreement Could Have Big Impact On Auto Industry

The prospective nuclear agreement among Iran, the U.S. and four other nations could have major ramifications for the auto industry by opening up a new and significant emerging market.

With its large, educated population, Iran is considered one of the most promising untapped automobile markets beyond the nations of Brazil, Russia, India and China. Development of the Iranian auto industry has been stunted by economic sanctions and years of political tension with the U.S. and elsewhere in the West.

The successful completion of a definitive agreement to halt nuclear weapons development by Iran could represent the start of a new era for auto production and sales in the country.

The two dominant Iranian automakers, Iran Khodro and SAIPA, are “highly interested in joint ventures” with foreign automakers, said Stephanie Vigier, the principal Middle East analyst at IHS in Paris.

“They want to attract technology. They want to be able to make all the components in Iran and want to produce cars fully. They want to export cars to other countries,” she said.

Iran Khodro and SAIPA have partnerships with Renault, Peugeot, Kia, China’s Chery and a few other foreign manufacturers. Sanctions, especially the tighter restrictions imposed in the last four years, have hit the industry hard.

Iran produced 1 million light vehicles in 2014, according to the OICA, an organization of global auto manufacturers. That is down from down from 1.65 million in 2011, when Iran ranked as the world’s 13th largest auto producer. Many of the vehicles made now are built from complete knockdown kits.

Analysts see potential in Iran because of its size and great pent-up demand. It has 77 million people — slightly more than Turkey and nearly as many as Germany. Most do not own cars now, and a sizable younger generation will soon reach car-buying age. Some analysts estimate half of the cars on the road are more than 20 years old.

Michel Jacinto, another IHS analyst, said the cars that roll out of Iranian plants now are roughly the equivalent of what appeared on U.S. or European roads 10 to 20 years ago. One of Iran Khodro’s models is the Peugeot 206, based on an old platform from its French partner.

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