Automotive Industry in Iran - Market and Domestic Production

Market and Domestic Production

In 2008, IDRO reported that SAIPA accounts for 54 percent and Iran Khodro for 46 percent of the output. Although carmakers are listed on the stock exchange, the government still owns about 40 percent of both companies. In July 2010, the government sold a further 18% stake in both Iran Khodro and Saipa for about $2 billion in total, bringing down its participation in both companies to about 20%. In August, both deals were cancelled by the Iranian Privatization Organization. No clear reason was given for the cancellation of the deals, but analysts believe that discontent over the prices at which the blocks were traded is the most likely reason.

The other car manufacturers, such as the Bahman Group, Rakhsh Khodro, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%. These automakers produce a wide range of automobiles including motorbikes, passenger cars, vans, mini trucks, medium sized trucks, heavy duty trucks, minibuses, large size buses and other heavy automobiles used in commercial and private activities in the country. Iran Khodro Diesel has a dominant market share (+70%) in bus, truck and van production.

Iran with having a fleet of 7 million passenger cars, buses and trucks ranked the world’s 16th biggest automaker and one of the largest in Asia in 2006 with annual production above 1 million units and 1.3 million in 2009, resulting in almost 1.5 percent of total world production of vehicles and 1 car per 10 person. By 2010 Iran's fleet reached 11.5 million cars.

Sixty percent of passenger cars produced in 2008 will use natural gas as fuel or will be dual-fuel, and the remaining 40 percent will run on regular gasoline (2008). Some problems faced by the industry are slow deliveries of cars, lack of after sales services and low quality in the production of some cars. Car production in Iran has increased 445% between 1998 and 2008.

More than half of the vehicles in Iran are over 25 years old (2007). The government has sought to upgrade the local fleet and the authorities aim to pull some 200,000 outmoded vehicles off the road each year, underpinning demand. According to estimates the demand stood at 1.5 million vehicles in 2007, which could not be met by the local producers. Auto manufacturing industry's share in gross national product is two percent and Iran's auto production rate in the global markets is 1.7 percent (2008). Previously buyers had been purchasing vehicles outright in cash, but now over half of all new car sales are through finance companies or on lease purchase schemes.