South Korea’s KIA and Iran’s SAIPA have struck a deal to manufacture South Korean cars in Iran, SAIPA Director General Saeed Madani said. KIA Cerato will be the first Korean car to be manufactured there, Vestnik Kavkaza reported. They will have engine volumes of 1600 and 2000 cubic centimeters, manual and automatic gears. Ceratos will most likely enter the market by the end of the year (by March 20, 2015). In Madani’s words, SAIPA has also negotiated cooperation with other foreign car manufacturers.
A new council chaired by Mohammad Reza Nematzadeh, minister of industries, mines and trade, meets twice a month to discuss automobile reforms. There is already a slight improvement in production: despite the overall decline, figures over the past quarter almost equaled those of the preceding six months. But while there are positive signals and huge potential—there are 14 million cars on Iran’s roads, half of which are dilapidated. Unofficial estimates put the sector’s debt to Iranian banks as high as 100 trillion rials ($4 billion). “The pressure that banks exert on parts makers is far bigger than the Tax Organisation,” said Farhad Behnia, a member of the Iranian Auto Parts Manufacturers Association. “Out of 860 members of the association, 20 percent have shut down their factories. Everywhere in the world, governments decrease bank rates to support producers,” he added. The crisis for Iran’s car producers is exacerbated by the effect of high inflation on the purchasing power of Iranian consumers. The cost of a Kia Pride—the South Korean car that accounts for up to 40 percent of vehicles on Iranian roads—has risen from 75 million rials ($3,015) two years ago to 180 million rials ($7,238) today due to the 50 percent drop in the value of the rial caused by the sanctions. “Demand has gone down by 35-40 percent because many people cannot afford to buy a car any more,” said Saeed Laylaz, an economic analyst.