FDI in Iran's auto industry picks up speed (page 3 of 3)

During a May visit to Iran, Syrian Industry Minister Muhammad Safi Abu-Dan praised developments in the Iranian auto industry and urged expansion of cooperation between Tehran and Damascus in the sector.

Inspecting the production line of Samand sedans, he said they have negotiated with the company's officials to launch its manufacturing line in Syria. According to the preliminary agreement signed between the two countries' officials, some 5,000-15,000 vehicles are to be manufactured in the first and second phases respectively.

Indian car manufacturers are also in the mix, although there are some difficulties. In August Iran Khodro announced that it is starting negotiations with Indian companies for outsourcing cars, saying that the pace of its discussions with initial target Tata Motors is unsatisfactory.

Iran Khodro had started negotiations with Tata Motors to outsource cars in the A and B segments. This would have meant Indica cars being shipped to Iran. The company is reportedly still interested, but Iran Khodro has started looking at other potential suitors in India.
That Tata Motors may have second thoughts about cooperation with Iran is understandable.

In August, the vice chairman of the Majlis Industries and Mines Commission, Hamid-Reza Katuzian, said that the L90 project jeopardizes the country's industrial independence and should be scrapped as soon as possible. This is hardly a comment to reassure potential foreign partners and investors.

Trade politics

Katuzian criticized the L90 project as a step backwards to the assembly era, which arguably it is. However, assembly that demands international quality vehicles can filter learning and competitiveness into Iran's homegrown manufacturing industry.

The commission vice-chairman also said it would be better to improve the quality of domestic auto manufacturing technology rather than blindly adopting the imported L90 technology. Whether the Majlis will interfere further and block fruition of the L90 project, or other foreign car manufacturer interest, is unclear.

Given that the Seventh Majlis is far more conservative than its predecessor, owing to the hardline Guardian Council disqualifying thousands of liberal candidates from the elections held earlier this year, it hardly leans toward greater foreign economic involvement in the country.

If the foreign partnerships do pan out, Iran will be in pole position to serve as the key regional car manufacturer serving the Middle East.

Other countries in the region, notably Egypt, have substantial car assembly arrangements with companies including Daimler-Chrysler and BMW, but Iran has a more substantial automotive components sector that could underpin attainment of the country's status as a truly international manufacturer and exporter.