Page 58 - IRANRptSep22

9.1.3 Automotive sector news
Iran and Russia save each other’s car industries
Six million tyres produced by Iran in first Persian quarter
Russia is turning to Iran to help rescue its car industry. Extreme sanctions imposed on Russia in March have seen its car production come to a screeching halt as essential imported parts are now unavailable. Iran has been under sanctions for decades, but has managed to develop a large automotive sector that caters to its domestic demand, and it is only too happy to help.
Russia’s war has seen hundreds of foreign companies leave the country, but no sector has been harder hit than the automotive. AvtoVaz, maker of the Lada, has seen its production come to a virtual standstill as the company, formerly run by Renault until its exit last month, set up a “spoke and wheel” model that means most of the more sophisticated parts were imported from Western Europe. Those imports have stopped now and the company has few alternative options to replace them.
Sixteen European car manufacturers (including four of the top 10 by market share) sold close to half a million units of Russia’s total sales of 1.67mn in 2021, making the country the eight-largest car market in the world in terms of global sales volumes, and Russia accounted for a fifth (18%) of market leader Renault’s total sales worldwide. Now overnight, almost all those foreign firms have packed their bags and left. Car sales were down by 84% in May and production has come to a virtual standstill, with only 3,000 cars produced in June, according to reports.
Iran has always been on Moscow’s radar as a possible ally in a showdown with the West. Russia has been preparing for economic warfare since at least 2014, when the sanctions regime was first introduced with the creation of the International North South Transport Corridor (INSTC). This long land and sea corridor traverses southern Russia, through the Caspian Sea to Iran and across the vast Iranian plateau to connect with the port of Chabahar and the Persian Gulf. This southern route was often seen as a back-up for Russia if its Western trade routes were cut off.
When they came the sanctions were more extreme than anything the Kremlin was expecting. They have been made worse by “self-sanctioning”, as companies in sectors that have not been sanctioned, including automotive, pulled out anyway for reputational reasons. The Putin administration has been forced to work extra quickly to help revive its faltering economy. As bne IntelliNews reported, sanctions remained a largely Western affair, with most of the rest of the world sitting on the fence, refusing to impose sanctions themselves and maintaining trade ties, even if they are not actively supporting Moscow.
Iran, China and a slew of other secondary countries have said they would pick up the slack where Western firms departed from. China has already seen exports to Russia recover and is Moscow’s biggest trade partner; Iranian brands are largely unknown in Russia, but Iran’s expertise in operating under sanctions has caught Russia’s attention. In particular, the Russians were surprised to see how quickly Iranian car manufacturers were able to reverse engineer parts from Peugeot, Citroen and Renault for their own auto part markets.
Iran produced 5.97mn tyres in the first three months of the current Persian calendar year (March 21 to June 21), Mehr News Agency has reported.
The figure was 1% down on ouput year on year.
Iranian tyre producers develop treads similar to those of international players
58 IRAN Country Report September 2022 www.intellinews.com