By Sharad Matade
As economic sanctions on Iran were lifted from this January, the country’s tyre companies are looking for fresh investments and technology collaborations to be more competitive, according to Mohammad Reza Ganji, Chairman of Iran Tire Association. “We are planning to double our production capacity in the next five years and for that we need foreign investments and Joint Ventures to get the latest technologies to make products that meet the demand from all markets,” says Ganji in an interview to Rubber Asia. The Association consists of all nine tyre companies in Iran and is pushing hard to protect its members’ interests in the changing scenario. While speaking at length on the current status of Iranian tyre industry, he expressed the view that import of the cheap Chinese tyres should be regulated and foreign tyre companies should join hands with local companies to set up business in Iran. Excerpts:
In the wake of lifting the economical sanctions, how do you see the future of the Iran tyre industry?
In Iran, there are only nine tyre manufacturers and the current capacity of the industry is 235,000 tonnes per year. After lifting the sanctions, we have started increasing our production capacity. In the initial phase, we are planning to add 100,000 tonnes and then reach 500,000 tonnes in five years from now. The increased capacity will be distributed among all the nine member-companies.
We have four to five automotive companies and they produce 2 million cars per year and they are in negotiations for Joint Ventures now. In the coming two years, we hope to see a host of new brands in Iran leading to an increase in domestic consumption of tyre.
What are the main challenges facing the Iranian tyre industry?
We need finance to expand tyre production capacity in the country. Bank interest rates are quite high, but the Government allocates some funds to the industry with special interest rates which are comparatively the same as international interest rates. Anybody who wants to come to Iran for tyre business can utilise these special facilities.
On the technology front, though most of the companies’ production facilities were established on foreign companies’ technology, they have now become quite old. Yes, we are in talks with major tyre companies globally regarding improvement of technology, but we are not successful till now as they are very conservative about the sanctions. They are waiting for lifting the sanctions completely.
Many international companies have shown interest in doing business in Iran. How do you see the competition from international companies, armed with latest technology and strong finance backing, entering the Iranian market?
Considering the current realities, they will have to enter Iran through Joint Ventures with Iranian companies. In the past , international tyre companies were here in some form of collaboration with local tyre manufacturers. They came to Iran alone too, but I feel if they form Joint Ventures with us ( localtyre companies), they can reach their goals sooner.
The import of China-made tyres is on the rise. As the leader of the Association, what is your strategy to protect the interests of the domestic players?
We are open to quality tyre imports from international companies. The Chinese tyre companies are currently exporting 100,000 tonnes of tyres to Iran.We address this issue in two ways. First, we have had talks with the Government officials to ensure taking some actions such as higher tariff duty, countervailing anti-dumping duty on import of poor-quality tyres etc. So far, the response from the Government is lukewarm and it (Government) emphasises on having more talks on the subject.
Another course is that we have a Commission under the Ministry of Industry for the imports of tyres and we are one of the members of the Commission. Anybody who wants to import tyre in Iran has to get approval from this Commission. The permission is given based on certain quality standards and one of them is the European mark, known as E mark and SWR (Sound, Wet grip and Rolling resistance) requirements. Around eighty Chinese tyre companies are importing their tyres in Iran and I believe half of them don’t meet these quality norms.
What are the steps being taken to improve the quality of Iranian tyres ?
I believe Iranian tyres are good in quality. Iranian tyres have a mixture of European and the US standards. We are not worried about this right now as we can meet any standards.
Could you please give us un update on raw materials, labour cost and import & export duty?
Iran is a net importer of natural rubber. Most of the natural rubber is imported from Malaysia, Thailand and Vietnam. With regard to the rest of the raw materials such as synthetic rubber, carbon black, chemicals, oil and others, 50% of the requirement is met domestically and the rest through imports. Iran’s import and export policies are very industry-friendly. Import duty on raw materials is around 4%, while the export duty on finished products and raw materials is nill. However, on imports of radial tyres, traders should pay 32% import duty, and on heavy tyres they have to pay 20%.
Currently, most of the tyre companies are exporting their products to neighboring countries such as Pakistan, Afghanistan, Iraq, the CSI countries and some parts of Turkey. We are also exporting bicycle tyres to African countries like Nigeria and Kenya.
Labour cost is very competitive here. Right now, lobour cost in Iran is lower than that of China. The minimum wage in Iran is $300 per month which is less than that in China. Electricity tariff is also not very high. Tax rate is 25% on net profit which is also not very high.
What is the present status of the Iranian tyre industry with respect to R&D and product development?
The technology of most of the tyre companies in Iran is mainly based only on the US and European companies. For instance, Yazd Tire produces tyres based on Vredestine technology. We have Rubber Industries Engineering and Research Company (RIERCO), which is Iran’s finest rubber expertise centre to support the rubber and tyre sector of the country with technical and engineering support services, research and development projects, training and professional publications.
Main shareholders of RIERCO are the nine Iranian tyre manufacturers who hold about 98% of the shares. RIERCO is also equipped with Bead unseating and plunger testing facilities. In the near future, it will be fully equipped to test rolling resistance, wet grip and noise.
What are the steps being taken by the Association to introduce Iranian tyre industry to the outer world?
Our current capacity is only 230,000 tonnes which is not much and does not meet the domestic demand. We export only around 5 per cent of our total production and that too only to neighboring countries. That’s the reason why we are not seen at the global expos and seminars.
The recent sanctions also have limited our business with Western world. We don’t have plans to set up plants in other countries right now. But, of course, as I said, we are looking for technology and Joint Ventures with foreign companies.