Iran urged to encourage foreign investment in auto production projects

Iran has recently been witnessing an increase in the number of major trade delegations – mostly from Europe – that visit the country to explore the avenues for investments in the country in the post-sanctions era. This has already raised speculations about which specific market looks more attractive to investors and also how Iran would benefit the best from the return of investors.

Economists and merchants in a survey carried out by the Persian-language newspaper Etemad have almost unanimously emphasized that Iran’s auto industry is one of the most appealing sectors for foreign investments.

However, there was also an agreement among almost all the participants that Iran needs to force a shift in attitude of the investors with regards to their plans for the country’s auto sector.

“There are lots of attractions in Iran’s auto sector for foreign investors,” said economist Jamshid Pazhouian. “However, they are more interested in selling cars to Iran rather than producing cars in Iran,” he emphasized.

The return of investors as salesmen, others survey participants maintained, will not help resolve Iran’s economic problems. “Iran needs to take measures to engage Europeans in its industrial production projects,” said another economist Jamshid Edalatian Shahriari. “The Europeans never engaged themselves in production projects and when they decided to put Iran under pressure [through sanctions], they easily packed and left.”

Sentiments against European carmakers that left Iran over the past few years after the implementation of sanctions are currently high in Iran. One of the companies that appears to have now caught the ire of Iranian officials in the French auto major Peugeot.

Iran Khodro’s CEO Hashem Yekke-Zare, who had recently visited Paris, told reporters his company “is seriously following up on the damage incurred” after Peugeot’s sudden withdrawal of investments in Iran. Also, Mohammad Reza Nematzadeh, the minister of industry, mine and trade said earlier this year that “Peugeot must pay for its past deeds and make up for them in some way”.

The participants in Etemad survey have further emphasized that foreign investments in Iran’s auto industry will provide Iran with a huge potential to make major exports to the region. “Iran’s industrial sector is still underdeveloped as the result of sanctions. Yet, there still exists a great potential for a big leap forward thanks to the available infrastructures,” said academic Mohsen Bahrami. “If adequate investments are made, Iran can support the demands of the region in areas such as the auto sector.”

Iran announced on Sunday that a major Polish trade delegation is expected in the country to study areas for investments in the country. Several other delegations from other European countries including Germany, France, Switzerland, Italy and Austria have so far visited the country. Delegations from Asian countries such as Oman, India, China and Turkey have also visited the country.

Pedram Soltani, a merchant and a member of Iran Chamber of Commerce, said Germany and France are already looking into investments in Iran’s auto sector.

The automobile industry is seen as Iran’s biggest non-oil sector. It accounts for nearly 10 percent of the country’s gross domestic product (GDP). Latest data shows that Iran ranks 18th on the list of the world’s top auto manufacturers.

Major local producers Iran Khodro and Saipa companies account for more than 90 percent of the total domestic production in Iran. Other figures show the country also relies heavily on imports. Iran imported 102,000 cars during last Persian calendar year (ended March 20, 2015,) showing a 31% year-on-year increase.