Iran’s car industry circumvents sanctions by producing more parts domestically: BMI

TEHRAN,Oct.29(MNA)--Business Monitor International (BMI ) agency in its new report about Iran’s car industry, entitled "Iran Autos Report Q4 2011", expects stable vehicle production and strong sales over the next four years in Iran. BMI declared that “Iran’s auto sector continues to narrowly avoid direct impact from international sanctions”, adding that “it circumvented sanctions by producing more parts domestically”. Pointing to the sectors continuously growth in recent years, BMI noted the growth owes in large part to the aggressive growth strategy of Iran Khodro Company (IKCO), which itself experienced sales growth of 18.0% in 2010, with plans to build 850,000 vehicles in 2011. IKCO has circumvented sanctions and plans to increase exports. BMI noted that large government subsidies and trade restrictions have reduced competition in the industry and facilitated strong domestic growth, although those measures have also hidden financial and operating weaknesses. According to the report, As the Iranian autos market becomes saturated, continued growth will rely on higher export volumes in markets abroad. IKCO has been expanding its ties with Turkey through joint ventures (JVs), for example. That said, while Iran's new car models meet Western emissions standards, issues of quality and operational weaknesses, as well as the potential for more stringent sanctions, signify that growth in the sector may be restricted to markets with limited purchasing power, the BMI added.