Iran’s domestic car market stalls as nuclear deal falters

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More than 100,000 people are employed by Iran-Khodro and SAIPA, while another 700,000 Iranians work in industries related to car manufacturing. (AP)
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Iran’s auto industry suffered under US and Western sanctions, which targeted Iran over fears about its nuclear program. (AP)
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Iran, one of the Mideast’s biggest countries and home to 80 million people, has a huge demand for automobiles. (AP)
Updated 21 September 2018
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Iran’s domestic car market stalls as nuclear deal falters

  • Iran’s auto industry suffered under US and Western sanctions, which targeted Iran over fears about its nuclear program
  • There are fears by some business analysts in Iran that any downturn in the auto industry would further worsen unemployment in the country

TEHRAN, Iran: 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.
Soon, however, Iran’s faltering nuclear deal with world powers may be what causes the country’s domestic automotive market to stall out.
As Iran’s currency, the rial, suffers precipitous falls against the US dollar — down some 140 percent since President Donald Trump withdrew America from the accord — cars are growing more and 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, said Mohammad Reza Najfimaneh, the head of the Iranian Specialized Manufacturers of Auto Parts Association.
Iran, one of the Mideast’s biggest countries and home to 80 million people, has a huge demand for automobiles. In 2017 alone, Iran produced more than 1.5 million cars, up some 14 percent from the year before, according to a report by Iran’s Ministry of Industries, Mines and Trade earlier this year.
Some 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.
Iran’s auto industry suffered under US and Western sanctions, which targeted Iran over fears about its nuclear program. The West worries Iran could use its technology to build atomic bombs. Iran long has said its program is for peaceful purposes.
The 2015 nuclear deal, which saw Iran limit its enrichment of uranium in exchange for the lifting of some sanctions, provided a needed boost to the industry.
French car-maker 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 $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.
Now, however, those firms have pulled back on those plans.
Concern over Iran’s domestic auto industry has been high. That was shown in a visit to Iran-Khodro last week by Ali Shamkhani, the secretary of Iran’s Supreme National Security Council.
“The enemy in the economic war is after damaging public contentment and the auto industry is one of the front lines in the war,” Shamkhani said during his visit.
More than 100,000 people are employed by Iran-Khodro and SAIPA, while another 700,000 Iranians 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 country.
Iran’s official unemployment rate is 12.3 percent, meaning some 3 million people are out of work, but experts believe it is much higher, especially among university graduates. Those unemployed often try to scrape enough money together to work as taxi drivers in the city, meaning they could be doubly hit.
Meanwhile, the drop in the Iranian rial has made buying a car difficult. The rial traded at 62,000 to the dollar before Trump’s pullout from the nuclear deal in May. It has gone as high as 150,000 to $1 since.
“I saved some money to buy an Iranian car, but prices jumped and factories do not provide cars on time,” said Mahin Tabrizi, a 45-year-old teacher. “I don’t know what I can do.”
Those prices also have hurt auto parts sales.
“Prices of car parts are crazy, all because of the sanctions,” said Mahmoud Rahimi, a taxi driver. “I bought brake pads for my car for double the price in less than a year.”
Even those who pay for an Iranian car can face delays in having them delivered. Iranian car production reportedly dropped 29 percent in June compared to the same month last year. Analysts blamed that on lack of parts due to currency fluctuation.
Meanwhile, 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.
In the absence of Western car makers, however, China is already starting to show up in the country. A new dealership for Chinese automaker Chery recently opened in Tehran. Iranian lawmaker Vali Maleki, a member of the parliamentary committee on industry, last month suggested that Chinese companies can 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 $2,000 to $4,000.” Those cars are partly assembled in Iran.
Demand is still strong for Iranian-made cars as well, however.
Last week, in less than an hour, 50,000 customers rushed the website of SAIPA to pay nearly $2,000 each to buy cars that the company plans to make in the future. The move is largely an effort by buyers to save on their purchases as the rial continues to fall. Another factory, Iran-Khodro, has a similar plan for selling future cars next week.
Still, anger over quality lurks.
“In other countries people pay small advance fees to buy a standard car based on installments,” said Fatemeh Azari, whose son last week managed to buy a car on SAIPA’s website. “Here, we pay all the money in advance to receive a clunker months later.”


Thousands flee bombs and hunger in eastern Syria

Updated 25 min 49 sec ago
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Thousands flee bombs and hunger in eastern Syria

  • UN Spokesperson says at least 16,500 people have been forced to flee their homes
  • Almost 320 civilians have been killed, including 113 children

AL-HOL, Syria: Faraj was born in the pouring rain on a nondescript stretch of desert road in eastern Syria as his family fled escalating fighting over the Daesh group’s last bastion.
His family was part of a group of around 200 civilians who managed to escape from a pocket of territory in Deir Ezzor province that is still held by the jihadists.
“I had to resist hunger, cold and rain,” the newborn’s mother Kamela Fadel tells AFP in a camp for displaced people in the northeastern region of Al-Hol.
The young woman, her husband and their four children now sleep under white tents, with hundreds of other people who fled eastern flashpoints in past weeks.
They are huddled on straw mats laid out directly on the gravely earth, wrapped in blankets and hugging bags packed with their meagre belongings.
A nurse helps an elderly lady to the camp clinic as children play at scaling piles of foam mattresses and families sit cross-legged, eating from tin cans.
It is still cold in the vast tent but at least they are sheltered from the rain.
They walked for several days in the winter weather before being met last week by the Kurdish-led Syrian Democratic Forces (SDF) battling IS in Deir Ezzor.
“It was hunger that prompted us to leave, there was nothing left to eat,” says Kamela’s husband, still sporting the thick beard the jihadists impose on all adult men.
He and his family were living in Al-Shaafa, one of the last villages, together with Sousa and Hajjin, that are still under the control of IS.
The SDF, with the support of air strikes by the US-led coalition against IS, launched a major operation against the last rump of the jihadists’ moribund “caliphate” in September this year.
The jihadists hunkering down in their Euphrates Valley heartland have offered stiff resistance, thwarting coalition hopes of a quick victory.
Warplanes have been raining bombs on IS targets in and around Hajjin, causing significant civilian loss of life in the process, according to the Syrian Observatory for Human Rights.
The Observatory says almost 320 civilians have been killed, including 113 children.
“There is destruction everywhere because of the fighting and the bombardment. We were scared for the children,” says Faraj’s father.
Local camp official Mohamed Ibrahim told AFP around 1,700 civilians had arrived in Al-Hol in recent days.
The intensity of the bombardment and the remoteness of the area make it is difficult to estimate the number of civilians who remain, voluntarily or not, in the IS pocket.
“In Syria, displacement leads to food insecurity as people leave their belongings behind,” said Marwa Awad, a spokeswoman for the UN’s World Food Programme in Damascus.
“This is why it’s vital to maintain a lifeline of food assistance for vulnerable families such as those escaping violence in Deir Ezzor,” she said.
Awad said at least 16,500 people had been forced to flee their homes in Hajjin and surrounding areas since violence in the area intensified in July this year.
SDF fighters too suffered heavy losses in their assault on Hajjin, where a group of die-hard jihadists with little to lose are making a bloody last stand.
“There are land mines everywhere on the roads,” says Abu Omar, one of the displaced in Al-Hol.
Fearing retribution against relatives who have stayed behind in IS-controlled territory, he refused to give his full name.
“The village and our homes have been destroyed by the bombardment,” says Abu Omar, a man in his thirties.
“There are still high-ranking members of IS and foreigners there, but most are on the Hajjin frontline,” he says. “They won’t give up easily, they are fighting to the death.”
The US-led coalition puts the number of jihadist fighters holding out in that area at around 2,000.
“The day we managed to flee, the fog was thick and gave us cover. Had they seen us, they would have wiped us out,” says Ziba Al-Ahmed, who escaped the town of Sousa.
“The bombardment was so scary and our bellies were crying,” says the mother of four.
Their farming machinery was too precious to leave in Sousa and her husband stayed behind with one of their daughters.
“We’re worried about them, we don’t know what’s going to happen to them.”