The auto industry in Iran has around half a century of history, began by assembling Jeep vehicles in Iran in 1957. During 1960's a trend started in Iran to establish assembly lines for various cars, buses, and trucks. For example Fiat, Iran National, Moratab Industrial Mfg, Zamyad, Iran Kaveh, General Motors, and Mazda could be singled out, many of which still operate under new names and management.
During 10 years of 1979 to 1989, which were the recession years in the Iranian auto industry, diverse ideas came into the minds of decision-makers, all facing this challenge that whether auto manufacturing should be supported or scrapped; and whether instead prioritisation should be given to other sectors such as agriculture and other industrial fields, with vehicles being imported from abroad. This uncertainty forced our flourishing auto industry into standstill. But immense investments made on Peykan production, internal events, changes concerning the foreign party providing Peykan parts, domestic demand, and then political condition forced officials to resume its production line. But this time a path was chosen to help boost indigenous manufacturing capability with the aim of replacing imports in the longer term.
Circumstances following the end of Iran-Iraq War, the economic condition, the need for more new investments, employment, and perhaps the most important - eight years of "forced production" by the industry to support the war effort, prepared the ground for a self-induced drive towards development of auto industry in Iran and manufacturing of parts, which had been draining the oil revenues since many years earlier. In the winter of 1992 the Iranian Parliament passed the National Vehicle Act, which helped to define the shape of the auto industry in Iran. Beginning from the 1993, this self-esteemed drive thrived with more determination and planning than ever, yet in a smarter way.
Investment made, both in national and in foreign currencies, during this period - most of which by private sector and the rest by the government - saved an average amount of US$750 million annually for five years by replacing imports, while ill-devised policies of auto builders to monopolise the auto-part industry, slowed down its progress. Nevertheless the movement of continued investment and aiming at international competitive markets, was blocked, namely, to keep prices competitive by creating parallel investments, fragmenting an already fragmented (in the millions of global scale), and sponsoring new inexperienced manufacturers.
Taking the latest figures from the 1998 survey by IAPMA of 119 member companies, an equal to the total invested capital had been dedicated to development, while the management policy of the auto industry in Iran during the last three years, frustrated all the existing hopes. An industrialist who was about to reach a level of confidence after half a century of valued experience that "he can manufacture," knows how to manufacture, knows its problems and shortcomings, and knows how to address them. He understands the benefits of joint venturing with foreigners, license obtaining, creating quality assurance management systems, spending to increase quality, and the need to pay the costs of entering international markets. But he's so preoccupied with financial problems, contract renewal refusals, and his unknown future that will never be able not only to reinvest, or to choose suitable foreign partners, and plan for export, but on the other hand prefers to get out of this incongruent scuffle as soon as possible.
However, what the part manufacturers have done so far during this short period, deserves attention and more thought, because the buoyancy of starting to manufacture auto parts; some having a hundred years of history on their back, with 100% domestic capital and technical know-how, is by no means a simple task. The part manufacturers began by reverse engineering, and during 5 to 7 years moved forward shoulder to shoulder with our vehicle manufacturers and help them increase their production capacity to a level that they currently support a 360,000-vehicle annual output rate, comparing to less than 40,000 in early 1990's. Despite all the shortcomings, currently several of our manufacturers have foreign customers, and others are negotiating with potential European buyers. This is the valuable fruit of years of hard work.
Currently, the auto-part manufacturing industry is passing from production and capacity building, to quality production and export. So far, the part manufacturers have passed the hurdles of manufacturing, and now eyes the help of world-class manufacturers - in the form of transferring technical know-how, joint venture and etc. - to reach world-class levels of quality and capacity. Iran's auto industry plans to reach a production level of 750,000 by 2007. Therefore the auto industry intends to not only provide the domestic demand for parts with international standard quality, but also increase the production capacity and output to enter export markets.
