The purpose of this research is to come across an effective and implemental strategy for Iranian car industry to become an export player in the Middle-East region. With consideration the importance of market development for international auto makers, the Middle-East market is evaluated and Iran as a case study is looked over in terms of its potential automobile market and developing opportunities in Iranian car industry to become a manufacturing partner for international players. Through out a review of Iranian economy and the position of auto sector in Iran economy, the difficulties of growth and development, the role of government- as the regulator- are discussed briefly and the effect of international auto makers -in the past and future- is analyzed.
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On this basis, we point out the main troubles of the current auto industry’s structure and the government dilemma to set its policies. At the end we suggest a reform in the structure and strategy of both assemblers and suppliers to enter to the international markets.
Keywords: Operation strategy; Iran auto industry; Globalization, Regionalization, Industry study
Iran’s economic performance has begun to improve slowly after a decade of recession which was caused by the long and costly war with Iraq and fluctuations in oil prices. In the decade ending in 1998, GDP’s growth per capitals started to rise, although the average was only 3 percent per year. (Economic reports, the World Bank Group)
The automotive industry, as one of Iran’s most promising industries, was the country’s fastest growing industry with the average annual growth of 27.2% between 1995 and 2000 which was 5.5 times of the country average industrial growth. (Economic Focus, Iran Daily News).
The domestic vehicle production is growing quickly but it is highly protected, and only in highly exceptional circumstances can Iranians import cars from abroad. Locally produced cars have a reputation for poor quality and have contributed to the dangerously high pollution levels. Also, Iranian firms were not able to satisfy the domestic market in terms of quantity. Demand for automobiles, particularly passenger vehicles, far exceeds the supply. In fact, more than 450,000 people pre-purchase automobiles every year and wait approximately two years to receive them.
As a result the government, which wants to raise unit production and improve domestic industry in line with industrialization program, hopes to stimulate competition as part of the effect to make the economy less dependent on oil.
In order to follow the market reform plans and provide better circumstances for the country’s main industries such as petrochemical industry, textile and etc, President Khatami (since August 1997- 2005) in 1999, announced an ambitious program to privatize several major industries which included auto industry as a part of “total restructuring”
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