The automotive industry is considered as one of the most important manufacturing sectors of Iran and with total sales of 12 billion USD in 2014 it makes up for approximately 19% of the total industry, as well as for approximately 2.5% – 3% of Iran’s GDP. Iran’s automotive players can be divided into two main groups, namely automobile manufacturers and tier companies. Several national automotive manufacturers exist, including IKCO, SAIPA, Pars Khodro, Kerman Khodro and Bahman that produce a variety of different models (such as Samand, Tiba, Dena, etc.).
IKCO and SAIPA are the biggest automotive manufacturers and together own more than 79% of the total market share. On the other hand, local automotive tier companies possess the engineering and design knowledge for the production of the car body, motor, axle and other components. The self-sufficiency rate of local production lies at above 70%.
In this blog post we will introduce IKCO and SAIPA and will shed some light on the current situation of Iran’s automotive tier companies:
IKCO Group was established in 1963 and today is Iran’s largest car producer, as well as Iran’s 10th largest company. Currently it employs about 53,800 workers in the holding, of which 20,830 are working in passenger vehicle manufacturing companies. IKCO had a revenue of 6.3 billion USD in 2014, with a passenger vehicle production output of more than 600,000 units and its market share is 54%. The firm also has foreign production facilities, including sites in Venezuela, Belarus and Syria. IKCO exported 868 passenger vehicle units in 2014.
In January 2016 IKCO started a joint venture with its longtime partner, PSA, to produce 200,000 cars annually, including the Peugeot 208, 2008, and 301 models. Vehicle production will start in the second half of 2017 under a 50/50 joint venture. It is worth mentioning that Iran was Peugeot’s second largest market before the French automaker left the country in breach of contract, idling a massive assembly line which manufactured vehicles from kits of parts.
SAIPA Group is the second car manufacturer in Iran. The group was founded in 1966 as the Citroen Production Association, and today is Iran’s second largest automotive OEM and 21st largest company. Currently it employs 39,000 workers throughout the group, of which 10,027 are working in passenger vehicle manufacturing companies. It had a revenue of 2.6 billion USD in 2014, with a passenger vehicle production output of 250,000. Its market share is at 26%. The firm also has foreign production facilities in Iraq and Syria. In 2014 it could export more than 23,000 passenger vehicle units, which makes up for around 80% of Iran’s automobile export. SAIPA has been developing partnerships with Chinese companies for more than 10 years, but in 2014 it expanded its cooperation with new Chinese business partners as a result of the heavy sanctions.
As shown in the chart below, IKCO and SAIPA have been competing with each other for a long time.
Due to substantial value added and a growing automotive industry as a whole the automotive tiers were doing well in the period from 2001 until 2007 and the number of employees increased from 64,000 to 80,000. In 2013 there was approximately 620 active companies with 1,100 million USD added value. The total number of employees in this industry amounts to 64,541 people.
In 2014 less than 200 million USD of different parts were exported from Iran. However, the ‘Iran Automotive Vision 2025’ states that 6 billion USD worth of parts should be exported by 2025, which seems unrealistic in our opinion. Currently there are 24 stock listed tier companies and their total value in 2014 was at approximately 440 million USD. Today Iranian tier companies are trying to enhance their production rate and quality, as they are looking forward to experiencing a more favorable situation in the near future.
Written by ILIA Corporation Consultant Amir Ebrahimzadeh