March 7, 2010 / 12:53 PM / 10 years ago

Iran car maker boosts output, worries about tariffs

* Iran car maker says production reaches new record

* But Iran Khodro worried about planned tariff cuts

By Ramin Mostafavi

TEHRAN, March 7 (Reuters) - Iran Khodro, the Middle East’s biggest car maker, said on Sunday it was breaking its own production record in the 2009/2010 year but it expressed concern about plans to cut high tariffs on imported vehicles.

Like other Iranian car companies, Iran Khodro benefits from significant protection from foreign rivals, but the government is now planning to reduce import duties by 20 percentage points to 70 percent during the upcoming year.

Managing director Javad Najmuddin said such a move would help international companies from countries “which are issuing resolutions against us,” in reference to U.N. sanctions imposed on the Islamic Republic over its nuclear activities.

He also told a news conference the company was generally ready for privatisation, but that he preferred to be given some time to boost productivity and adapt its finances.

He said Iran Khodro — maker of both cars and trucks — expected to produce 680,000 vehicles during the Iranian year that ends on March 21. This was a new record for the company, but Najmuddin did not give a comparison. Next year, the aim was to reach 730,000 units.

“Despite the global recession and the bankruptcies of globally well-know companies, Iran Khodro has remarkably broken its previous production records,” Najmuddin said.

Iran Khodro’s market share, which had declined to about 46 percent last year after the phasing out of an old model, increased to 49 percent this year, he said. “We are planning to reach 50 percent again in the coming year.”

WIN-WIN

The company’s exports had also grown, with 30,600 units sold in 20 countries in the last 11 months, the Iran Khodro head said. This figure was expected to rise to 55,000 units in 2010-11.

Iran, which is under U.N. and U.S. sanctions over its disputed nuclear programme, is stepping up efforts to privatise state firms in a bid to revive the economy of the major oil producer.

Najmuddin said Iran Khodro was “fully ready” for privatisation, but later qualified his statement by suggesting more time was needed.

“I should say it’s better that they give us some time to correct our financial structures, increase our production and improve our productivity,” he said.

Like other Iranian officials, he shrugged off the impact of possible further sanctions over nuclear work the West fears is aimed at making bombs but which Tehran says is for peaceful power generation.

The U.N. Security Council has imposed three rounds of sanctions on Iran for defying demands it halt enrichment, and the United States is pushing for new punitive measures.

Analysts say such measures are making it more difficult to secure trade finance and deterring foreign investors.

“We are used to adjust ourselves and still be able to produce,” Najmuddin said. “Of course, it will prolong the work cycle but we will conquer the sanctions in the end ... with the strategies that we have adopted it won’t have much effect.”

Iran Khodro has a joint venture with France’s Renault (RENA.PA) to make the no-frills Logan, sold in Iran as the Tondar-90, and also Peugeot’s (PEUP.PA) 206 and 405 models.

France is among the Western countries that are seeking tougher sanctions on Iran.

But Najmuddin said: “Right now, our relationship with Peugeot is a win-win situation.” (Writing by Fredrik Dahl; editing by Jon Loades-Carter)

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