As Iran’s auto industry is grappling with a multifaceted crisis, there are signs that China’s nascent carmakers may step in to become part of the solution.
The US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and the impending reimposition of sanctions have not only caused a currency crisis in Iran but also led French automakers such as Peugeot and Renault to leave the Iranian market, creating a shortage of parts.
The auto sector is Iran’s second largest industry, valued at an estimated $26 billion. It is made up of both private and state-owned enterprises engaged in vehicle production as well as 1,200 businesses that are involved in making parts. Despite the presence of a multitude of companies, Iran’s auto industry is in fact rather exclusive. Indeed, the two main state-owned companies, Iran Khodro and Saipa, control more than 90% of production and sales. Now, however, both of these companies are facing a crisis that primarily stems from the US withdrawal from the JCPOA.
Iran Khodro, the country’s largest car manufacturer, recently issued a note to its representatives around the country, requesting that they introduce China’s H30 Cross as a substitute for the French Renault Tondar to customers. The measure was likely in response to Renault’s recent decision to halt all cooperation with Iranian automakers in the coming months. Similar withdrawals by Western automakers in the coming months could herald the beginning of engagement between Iranian automakers and their Chinese counterparts in a bid to reduce the impact of the ongoing crisis. Indeed, if the latter pans out, it has the potential of turning Chinese automakers into a key player in the Iranian market.
Unlike Iran’s auto industry, China’s is flourishing and on its way to becoming a world-class business. Some are comparing the current state of the Chinese car sector to that of Japan’s back in the 1970s or South Korea’s in the 1980s, when their respective industries began prospering.