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Defense Ministry Expanding Role In Iran's Auto Industry

Iranian Defense Minister Amir Hatami. FILE PHOTO
Iranian Defense Minister Amir Hatami. FILE PHOTO

Iran’s defense minister says industrial companies his ministry controls have expanded their involvement with the local vehicle manufacturing sector with "over forty trillion rials" (about $950 million) in contracts.

Referring to the ministry's "increasing presence" in Iran's vehicle manufacturing sector, Brigadier General Amir Hatami told a news conference on Sunday, August 16, "The Islamic Republic President Hassan Rouhani has ordered the Ministry of Defense to have an active role in Iran's vehicle industry.

"The Ministry of Defense has no plan to launch car manufacturing production lines," Hatami said, but "it is active in auto parts production and is supplying forty vehicle parts."

The military is deeply involved in Iran’s economy, and Rouhani vehemently objected in 2017 that Revolutionary Guards control a vast economic empire. But now the defense ministry seems to be also expanding its role.

On June 9, Amir Ali Hahizadeh, commander of the Islamic Revolution Guards Corps' (IRGC) Aerospace Force, announced the formation of a joint IRGC-Ministry of Industry committee to let the military elite enter the local vehicle manufacturing sector.

According to Brigadier General Hajizadeh, the presence of the IRGC in the Iranian car industry was based on an "order" issued by the Islamic Republic Supreme Leader Ali Khamenei.

On May 6, Khamenei had issued what sounded like an order or permission to the military. "The mind that can manufacture a satellite can also produce a vehicle that needs only five liters (approximately 1.3 gallons) of gasoline to run for 100 kilometers (about 62 miles)," Khamenei said.

The presence of the military in the Iranian auto-making is rapidly increasing even though Khamenei had earlier issued another "order" calling on the IRGC and other armed forces to withdraw from activities unrelated to their mission.

Iran's automakers are not private companies and are directly or indirectly controlled by state entities.

Based on the International Organizations of Vehicle Manufacturers' data, Iran's car production in 2019 decreased by 25% compared with the previous year, reaching 821 thousand units, of which 770 thousand were sedans.

Despite the sharp decline, the local vehicle market, valued at $ 12 to $ 15 billion per year, is still one of the most essential and attractive productions and brokerage markets in the Iranian economy.