Despite sanctions, car companies work with Iran

Group says numerous companies either export to Iran or have manufacturing agreements with companies controlled by the regime.

Toyota Prius cars 370 (photo credit: Courtsey of Toyota )
Toyota Prius cars 370
(photo credit: Courtsey of Toyota )
Foreign automakers are supporting the regime in Iran by offering state-owned companies access to advanced technologies that are often used for the Islamic Republic’s military and security apparatus, a US-based pressure group has warned.
United Against a Nuclear Iran (UANI), which this month ramped up its campaign to get foreign automakers out of Iran, says that Fiat, Isuzu, Kia, Mazda, Mitsubishi, Nissan, Peugeot, Renault, Suzuki, Toyota and Volvo either export to the Islamic Republic or have manufacturing agreements with car companies controlled by the regime.
Iran’s domestic auto industry is the regime’s second most lucrative after oil and gas, and has boomed over the past decade-and-a-half, as the Islamic Republic deemed it a priority industry.
According to a report published this month by Business Monitor International, the Iranian government has placed increased emphasis on its auto business in an effort to create revenue in the wake of increasing US and European sanctions.
European and Asian automakers, including Renault and Fiat, have a large presence in the country, mostly through joint ventures with state-owned Iranian companies, who manufacture vehicles under license, usually by assembling imported ready made car parts.
However, UANI has accused foreign car manufacturers of aiding the regime by partnering with the Islamic Republic’s auto sector, by providing an enormous source of revenue, including directly to companies controlled by both the Revolutionary Guards and the Iranian Development and Renovation Organization (IDRO), both of which are sanctioned by the US and EU.
IDRO, the government body responsible for accelerating Iran’s industrialization, controls companies linked to Iran’s nuclear and missile programs including foreign procurement of technologies to aid them, according to Swiss sanctions legislation
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IDRO’s subsidiaries include the Iran Khodro Company, the largest automaker in the Middle East that manufactures a range of foreign vehicles under license via partnerships with several foreign auto makers, including French automakers Renault and PSA Peugeot Citroen.
Via its joint venture with Khodro, Peugeot is the leading foreign car brand produced and sold in Iran.
Last year, Peugeot’s Iran exports accounted for around 13 percent of its global deliveries, and according to Business Monitor International, Khodro manufactured around 150,000 Peugeots in the quarter ending March 20, 2012. UANI says that Khodro produced 510,167 Peugeot vehicles in 2010.
This month, however, Peugeot said the company is putting at least part of its business with Iran on hold.
A PSA Peugeot Citroen union representative said the company’s production of vehicle kits for shipment to Iran for assembly had been frozen for at least five months, in the wake of international sanctions.
However, UANI says it remains unclear whether Peugeot is still doing business in Iran, and if so to what degree.
UANI spokesman Nathan Carleton told The Jerusalem Post that the pressure group remains skeptical that Peugeot has terminated its business in the Islamic Republic, pointing to a report in the hardline ISNA news agency that Khodro intended to make 15,000 Peugeot Pars sedans this year in its Fars factory.
In a recent report by Iran’s state-run Press TV, a Khodro spokesman said the company has yet to receive any official announcement from Peugeot that their partnership has ended.
Although Peugeot appears to be reconsidering its business in Iran, other foreign automakers are set to stay. UANI says that Italian auto manufacturer Fiat and its subsidiary Iveco have so far ignored requests to end their business with Iran.
Fiat has partnerships with Saipa, and Iveco has also licensed Iranian commercial automaker Zamyad to produce some of its trucks and buses.
Like Khodro, both Zamyad and Saipa are controlled by IDRO.
“The [Iveco] trucks have been used by the Iranian regime to transport ballistic missiles and stage gruesome public executions,” Carleton said.
According to Carleton, Fiat is also planning to expand its consumer marketshare in Iran this year by opening a luxury Maserati dealership in Tehran.
European car companies are not the only ones to do business in Iran.
Japanese automaker Mazda has a partnership with the Bahman Group, which produced over 36,000 cars in 2010. According to Iran’s Mehr News agency, Bahman is controlled by the Revolutionary Guards, who own 45.5% of its shares.
UANI has developed model legislation, dubbed the DRIVE Act, requiring automakers to certify they are not engaged in business in Iran to be eligible for US government contracts. It hopes the campaign will pressure foreign car manufacturers to withdraw from Iran by increasing their concern about public reaction and opinion.
Although some foreign automakers have ignored requests to end their business in Iran, UANI says that after it stepped up its auto campaign this month, some car manufacturers have responded positively.
Earlier this month, Hyundai said it had left Iran, where according to UANI it had extensive operations.
More recently, luxury car brand Porsche also said it had decided to cease its business with the Islamic Republic.
According to a report this weekend by the Revolutionary Guards-run Mashregh News, however, Porsche’s Tehran representative has denied the company plans to leave the Islamic Republic.
Citing official customs statistics, Mashregh says that during the last Iranian year (ending March 2012), Iranians imported 563 Porsche vehicles at a total cost of $49.8 million.
Carleton said the announcements from Hyundai and Porsche are “significant victories.”
However, Mashregh brushed off Porsche’s announcement, saying that any decision by the luxury automaker to cease its business with Iran would have “no effect on Iran’s auto market,” as the Islamic Republic’s imported luxury car market is very small compared with the market for domestically produced automobiles.
Sanctions have caused the Iranian Rial to deprecate significantly, pushing the price of foreign car imports out of reach of increasing numbers of Iranian consumers.
Last month, Bloomberg reported that Iranian dealers stocking foreign automobiles have started to see a downturn in sales, an indication that demand for European and Asian cars in Iran is plummeting.
A Persian-language report in the state-run ISNA news agency last week said that Iran’s car imports and exports had slumped in the last Iranian year.
According to an Economist report this month, Iranian domestic car sales are expected to slump by a further 10% in 2012, as foreign imports continue to shrink even more.
However, as sanctions make it hard for Iranians to buy foreign imported cars, the Islamic Republic’s domestic car industry may yet get a boost – particularly in the wake of a call by Supreme Leader Ayatollah Ali Khamenei for Iranians to support the economy by buying domestically-produced goods.
In his speech to Iranians at Nowruz last month, Khameini said the key to beating sanctions was increased domestic production.
Meanwhile, Iran’s state media continues to downplay the impact on Khodro of any decision by Peugeot to cease its business with the Islamic Republic, with a recent Press TV report saying the company was aiming to export to South America, Eastern Europe and Iraq this year.