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Iran’s automotive industry is slowly recovering

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Iran’s automotive industry is slowly recovering

While initial reactions from automakers after the sanctions were lifted have been positive, the Iranian automotive industry faces a long road on its way to recovery, mainly because of the bad state of the auto parts business.

Even worse, after initial prompt reactions form French carmakers like Renault and PSA who said they would rush to resume production, silence has settled from the big automakers – a good example being a gathering organized by the Iranian Auto Parts Manufacturers Association who utterly failed after 22 officials and vehicle manufacturers from the guest list were nowhere in sight.

Iran’s roughly 2,000 auto parts manufacturers are growing thin, as hundreds of them became bankrupt or switched to other business areas when sanctions on Iran’s trade were imposed by the US and EU.

“The pressure that banks exert on parts makers is far bigger than the Tax Organisation,” said Farhad Behnia, a member of the auto parts association. “Out of 860 members of the association, 20 % have shut down their factories. Everywhere in the world, governments decrease bank rates to support producers,” he added.

The auto parts producers also need help from the government, as the high interest rates on loans, usually at 25-30% were not decreased by the new government and the sanctions caused a high level of inflation – severely decreasing the purchase power of the typical Iranian customer.

Via Financial Times

by Aurel Niculescu (my Google+) - Thursday, February 27th, 2014 - filed under Industry, News. Image credit: .
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