The Iranian automobile sector faces a difficult future because of the sanctions

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The Iranian automobile sector faces a difficult future because of the sanctions


Teheran, Aug 7 (EFE) .- One of the first victims of US sanctions against Iran is the automobile sector, which is facing a complicated period for both the manufacture of vehicles and the import of spare parts.

This sector is penalized by the sanctions that entered into force today, imposed by the US after its withdrawal from the nuclear agreement of 2015 with Iran and which also concern foreign manufacturers established in the Persian country.

The most notorious cases are those of the French companies PSA and Renault, which in collaboration with local partners manufactured until recently almost half of the newly registered vehicles in Iran.

The PSA group, formed by Peugeot and Citroën, announced last June that “the process of suspension of activities” began to adapt to the US embargo, whose administration rejected France’s requests for exemptions for its companies.

PSA signed agreements with the Iranian manufacturer Iran Khodro in June 2016, to jointly invest 400 million euros and manufacture locally Peugeot cars, and with Saipa in October of that year.

For its part, Renault said it wanted to “maintain the long-term relationship” that it has with Iran, although more recently it advocated seeking opportunities in other countries to compensate for the reduction of business in the Iranian market.

This French manufacturer sold 162,079 units in the Persian country in 2017, an increase of 49% over the previous year thanks to the success of its Tondar and Sandero models.

The reality on the ground is that the expatriate workers of both companies have started to leave Iran and the level of production has been drastically reduced.

As a result, the price of the Peugeot 207 recently increased by 13% to reach $ 21,600, while the Sandero rose just over 10%, exceeding $ 23,000, according to a report by the Tasnim agency.

Other foreign companies in the sector with businesses in Iran, although smaller in scale, such as Scania, Daimler and Volvo, have also started their withdrawal, at least partially.

Foreign companies are aware that a complete exit from the Iranian market in this period of sanctions will make it difficult for them to return in the future, something that the Persian authorities themselves have warned.

“We are monitoring how large foreign companies interact with Iran in the current period and this will certainly affect our economic relations with them in the long term,” said Vice President for Economic Affairs Mohamad Nahavandian.

In addition to foreign manufacturers and their local partners, US sanctions also affect the spare parts sector, of which there are already some shortages.

In an official repair shop in Saipa, outside of Tehran, there were thirty cars covered with dust in the absence of spare parts.

“Because of the dust, we can perfectly well know that they have been parked for more than 20 days because we are missing some spare parts to repair them,” said Ali Reza, one of the operators.

The mechanic told Efe that this shortage is not yet directly motivated by the sanctions, since for example South Korea continues to sell them pieces, but rather by the devaluation of the national currency, which is holding back imports.

The fall of the rial, which has lost more than half of its value since April, has led to a general rise in prices, not only of imported items, and a great uncertainty at the time of purchase and sale.

According to a seller of spare parts, named Hasan and a store located in northern Tehran, the main reason for this shortage is speculation.

“The stores are full of spare parts because the big businessmen imported enough before the devaluation of the rial, but they do not sell them because they know that the prices are going to go up,” he complained.

Hasan acknowledged to Efe that with the sanctions the prices will suffer “another escalation”, while the income of his small business -added- “they do not even give to cover the rent”.

This first round of US sanctions also affects the trade in gold and other metals, precious as well as aluminum or steel, and prohibits the purchase of Iranian debt and the Iranian Government to acquire dollars, which has repercussions in many sectors of an economy and in difficulties.EFE