Puzzlement over why so many global governments seem reluctant to enact stiff economic sanctions against Iran in light of its apparent pursuit of an atom bomb and overall bellicosity may be partially explained at least by taking a look at Iran’s industrious automotive industry: It has business dealings with at least 35 countries spanning four continents.
Additional joint ventures are set to expand Iran’s international tally of trading partners.
Iran’s “national car,” the Samand – based on the Peugeot 405 platform and named for a fast-galloping horse – is sold the world over. Primarily produced in Iran for both internal use and export, the vehicle is also manufactured overseas in numerous facilities operated by Iran Khodro (IKCO), the nation’s largest automaker with a 60 percent domestic market share.
Like everywhere else, Iran’s state-run economy is being buffeted by the global financial downturn and money is tight for many of its 66 million-plus citizens. Yet Iranian officials report that 700,000 new cars are coming onto the country’s roads each year. They note how “driving has been made a national pleasure,” steered by a longstanding policy of government-subsidized gasoline prices.
The allotted per-motorist gallons have been consistently tightened, however, due to an energy crunch. The government contends this factor also explains its desire for peaceful nuclear-generated electricity.
Although Iran sits atop vast petroleum reserves that comprise its top industry – automotive is No. 2 – the nation lacks adequate refining capacity, forcing it to import 40 percent of its motor fuel.
Percolating just beneath the surface is the prospect of mass unrest from a citizenry increasingly agitated over the despotic tendencies of its theocratic rulers. Despite rationing, demand for gas is up 6 percent. Previous subsidy cuts have sparked uprisings; allegations of ballot tampering in the last election remain another source of discontent among a relatively youthful and sophisticated population that admires Western culture and its flow of consumer goods, especially electronics and cars.
Covering an area slightly smaller than Alaska but with much warmer desert temperatures, the old Persian Empire is in a region known as the “cradle of civilization.” Today’s international borders essentially stem from boundaries drawn on a map by foreigners who arguably failed to take into account religious, ethnic and tribal considerations.
Iran’s location along the ancient Silk Road has stimulated trade with other nations for centuries, but the people tenaciously resent interference by outsiders, especially from Americans and the British; some geopolitical commentators are warning that draconian sanctions could backfire by strengthening public support for the government, putting the brakes on potential regime change from within.
The United States enjoyed somewhat cordial relations with Iran prior to the Islamic Revolution of 1979 that overthrew the detested Shah Mohammad Reza Pahlavi, who was widely perceived as a puppet kept in power by oil-coveting Western interests engaging in Cold War politics. The situation was further soured when the U.S. supported Saddam Hussein during the Iran-Iraq War.
The first Model T Ford arrived in Iran during the 1930s, and other imports soon followed. In the late 1950s Iran started domestically producing vehicles such as the Jeep and Land Rover, later becoming the only nation outside of the U.S. to build Cadillacs. The Islamic Revolution and hostage crisis brought much of this economic activity to a grinding halt.
Iran’s automotive efforts went on to forge joint ventures with a melting pot of other countries. IKCO and Saipa, the nation’s second-largest OEM, have aggressively pursued both import and export opportunities. SAPCO, the Supply Automotive Parts Co., has played an equally prominent role in jump starting Iran’s automaking capabilities.
Nameplates with a notable presence inside Iran include Chery, Hyundai, Daimler/Mercedes-Benz, Renault and Peugeot.
Nissan’s Quashqai, called the Rogue in the U.S., is named for a nomadic tribe near Iran’s Shiraz City. IKCO communications manager Abdollah Babae reports that the vehicle, which can also be spelled as Ghashghai, “will hit Iranian market in near future.”
A roster of Iran’s export arrangements includes Algeria, Egypt, Ghana, Mali, Morroco and Senegal on the African continent; Asia’s Afghanistan, Armenia, Azerbaijan, Bangladesh, China, Iraq, Jordan, Kazakhstan, Lebanon, Malaysia, Pakistan, Saudi Arabia, Syria, Tajikistan, Turkey, Turkmenistan, the United Arab Emirates and Vietnam; Belarus, Bosnia, Bulgaria, France, Herzegovina, Italy, Poland, Romania, Russia and the Ukraine in Europe; plus South America’s Venezuela.
“Iranian vehicles are high quality and reasonable in price,” according to Venezuelan President Hugo Chavez, speaking at a May press conference in Caracas. Afghanistan’s government recently placed a big order for Samands to replace its aging taxi fleet.
Iran expects to grow its international reach through continued initiatives.
In October, IKCO and Peugeot inked an accord under which IKCO will produce Peugeot’s 207i hatchback in Iran for export to 63 nations, including Central Asian, Persian Gulf and North African states, plus Russia, Turkey, the Ukraine, Bulgaria, Serbia and Belarus.
Under the conditions of the pact, IKCO – which holds ISO 9001, ISO 14001 and OHSAS 18001 certifications – will also build the 207i along with 206 SD and Pars models in selected offshore locations such as Venezuela, Senegal and Syria.
“The IKCO-Peugeot agreement for producing Peugeot brand in overseas sites shows IKCO’s technical and quality capabilities in developing joint activities in foreign countries and producing Peugeot products in its international sites,” explains Mohammad Javad Najmeddin, IKCO’s CEO, who adds that an Egyptian plant may take on Pars production as well.
"In this way we can produce Peugeot cars in some of our production lines in oversea sites with vacant capacity,” Najmeddin says.
As Peugeot’s largest manufacturer outside of Europe, IKCO accounted for 9 percent of Peugeot’s global production in 2008 with 301,000 vehicles, up 2 percent over 2007’s output. The two firms have been doing business together for 20 years.
“I don’t see why this relationship shouldn’t last for the next 20,” says Peugeot/Citroen management board member Jean-Philippe Collin. “Definitely Iran Khodro is a part of our development strategy. Peugeot has always put Iran there as a long-term partner.”
After suffering through a bruising bottom-line letdown in 2008, IKCO is on track to end 2009 in the black, according to Jamshid Imani, the company’s vice president of finance and economy. “Since the last-year loss of $123 million has been recompensed, some $110 million is predicted for the upcoming-year profit,” he says, citing “the liquidation of $120 million of participation stocks” as a key factor in the firm’s rebound.
Imani goes on to diffuse rumors that plant shutdowns are in the offing. “All IKCO local sites are profitable and plans are underway to manufacture our latest products in these sites,” he points out, noting also that IKCO’s international locations remain solid. “These sites have been established based on the government’s major policies on decentralization, and reassessments show these sites are still profitable.”
After a year’s worth of effort, the Samand has achieved compliance with European Union IV emissions standards, paving the way for heightened sales.
“Revising the fuel system and installing a multilayer fuel tank, as well as employing new software to control the engine, were some of the actions taken to get Euro IV,” recounts Mohammad Kamjoo, IKCO’s research and development director.
“Getting Euro IV will enter Samand in a new stage in global target markets, especially in Russia Bulgaria and Turkey,” he says. “Following required changes and passing the related tests, which are necessary in European Union countries, Spain’s ministry of road and transportation, too, approved Samand. So Samand acquired the Euro IV standard completely.”
A Samand LX model with added comfort and performance features made its debut in March at Switzerland’s Geneva Motor Show.
In April IKCO rolled out its Runna, now in the running to become Iran’s second “national car.” As the nation’s first release to meet European Union pedestrian impact standards, it also complies with updated Euro V pollution abatement requirements.
The company is also developing line of vehicles powered by natural gas.
IKCO’s Mir Javad Soleimani, deputy CEO of quality and product, says an announcement is due in November regarding an agreement with an unnamed Asian manufacturer to introduce a successor to the omnipresent Hillman Hunter Paykan, which has been an Iran mainstay since its introduction in 1967.
Production ceased in 2005, but cash-strapped Iranian motorists have resorted to all manner of do-it-yourself ingenuity to keep these battered workhorses on the road. The utility aspect of the Paykan has been particularly popular among unsanctioned taxi drivers who pick up multiple fares for a cramped yet dependable ride to their destinations.
