Boston, MA -- (SBWIRE) -- 05/18/2013 -- In our previous quarterly report, BMI revised down its production and sales estimates for Iran's autos industry - despite total vehicle output by Iran's automakers increasing 2.4% year-on-year (y-o-y) to 1.64mn in the Iranian year ended March 19 2012 - owing to the withdrawal of many international companies from the country in the wake of global sanctions against its nuclear efforts.

This quarter we have again lowered our forecasts, with reports that Iran will stop vehicle exports in the calendar year beginning March 21 worsening the outlook for a market already at the bottom of BMI's industry Risk/Reward Ratings for the autos sector in the Middle East and North Africa. With output already declining as tie-ups with foreign firms dry up in the wake of international sanctions, and reports that Iraq has banned imports of Iranian cars, the move to become more self-sufficient faces new obstacles. Last quarter, we estimated that annual production growth would average 1.16% in 2013 to 2016 as the leading carmakers look to exports to offset the turmoil at home.

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This quarter, we now estimate output drops of 5.8% and 1.8% in 2012 and 2013 respectively. Production will improve in the long term, with annual production growth averaging 5.1% in 2014-2017.

BMI has already highlighted the issues impacting domestic new vehicle sales (see our online service, October 15 2012, 'Rial Weakness Hits Vehicle Sales'), and taking exports out of the equation leaves few options for companies producing in the country. Iraq's state-owned 'corporation for car imports' is quoted as saying the Iranian-built models do not meet required quality standards or fuel resources. CEO Adnan al- Sharifi said: 'Iraqi fuel is well refined, something that Iranian companies have not observed.'

Exports to Iraq accounted for 98% of the total shipments of Iranian cars in the first nine months of the calendar year (March 21-December 21 2012), however, which lends greater significance to the ban. Moreover, total exports for the period had almost tripled in volume compared with the previous year, and more than tripled in value to US$257mn.

Despite this, production has been on the slide, particularly as major partnerships such as that between Iran Khodro (IKCO) and PSA Peugeot Citroen have been impacted by sanctions. According to the ISNA News Agency, production lines for six foreign models will be closed. The Nissan Maxima and Qashqai, Hyundai Avante and Verna, Kia Rio and Lifan 250 will be the models affected. Hyundai has halted the supply of parts for its models and Nissan has not renewed its agreement for local assembly.

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