Across Iran’s capital, rush-hour traffic always grinds to a halt, a sea of boxy Renault four-doors and Peugeot coupes all idling their way through the streets of Tehran.
However, soon Iran’s faltering nuclear deal with world powers might be what causes the nation’s domestic automotive market to stall.
As Iran’s currency suffers precipitous falls against the US dollar — the rial lost two-thirds of its value against the dollar since US President Donald Trump withdrew the US from the accord — cars are growing more expensive, even as tens of thousands clamor to order domestic models online.
Meanwhile, Western manufacturers are pulling out of the country and foreign-produced parts are becoming harder to find as Chinese cars fill the void.
“It is clear and obvious that the US is purposefully putting pressure on the people of Iran to instigate discontent” over the auto market, Iranian Specialized Manufacturers of Auto Parts Association head Mohammad Reza Najfimaneh said.
Iran, one of the Middle East’s biggest nations and home to 80 million people, has a huge demand for automobiles. Last year alone, Iran produced more than 1.5 million cars, up about 14 percent from the year before, according to a report by the Iranian Ministry of Industries, Mines and Trade earlier this year.
About 90 percent of market share is controlled by two local companies: Iran Khodro, which assembles Peugeot-branded vehicles from kits, and SAIPA, which has made Citroens and Kias. Both manufacturers also build Renaults.
The 2015 nuclear deal, which required Iran to limit its enrichment of uranium in exchange for the lifting of some sanctions, provided a needed boost to the industry.
French automaker PSA Peugeot Citroen reached a deal in 2016 to open a plant producing 200,000 vehicles annually in Iran. Fellow French automobile manufacturer Groupe Renault signed a US$778-million deal to build 150,000 cars a year at a factory outside of Tehran. Meanwhile, Volkswagen announced plans to import vehicles into Iran.
However, those firms have pulled back on those plans.
More than 100,000 people are employed by Iran-Khodro and SAIPA, while another 700,000 work in industries related to car manufacturing.
There are fears by some business analysts in Iran that any downturn in the auto industry would further worsen unemployment in the nation.
Iran’s official unemployment rate is 12.3 percent, meaning that about 3 million people are out of work, but experts say it is much higher, especially among university graduates.
Those unemployed often try to scrape enough money together to work as taxi drivers in cities, meaning they could be doubly hit.
Meanwhile, the drop in the rial has made buying a car difficult. The rial traded at 62,000 to the US dollar before Trump’s pullout from the nuclear deal in May. It has gone as high as 150,000 rial to US$1 since then.
Importing a foreign car grows more expensive as the rial drops in value. Iran places import taxes of more than 100 percent on foreign cars. A ban on importing foreign cars also has been in force since April, halting new orders.
“Nearly two years ago, I paid for an imported car, yet they have not delivered it due to upheavals in the rial rate and sanctions,” said Reza Piltan, a retired engineer waiting for an SUV by South Korean manufacturer SSangYong.
However, in the absence of Western automakers, China is already starting to show up. A new dealership for Chinese automaker Chery Automobile Co (奇瑞汽車) recently opened in Tehran.
Iranian Legislator Vali Maleki, a member of the parliamentary committee on industry, last month suggested that Chinese companies could take over the share of other foreign companies that have left the Iranian market.
“The Chinese cars are selling very well in Iran,” car dealer Ali Razavi said. “Their dealerships offer a wide range of methods of leasing and financing that enable many customers to buy a new car for just about [US]$2,000 to [US]$4,000.”
Those cars are partly assembled in Iran.
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