In the modern world the automobile is an indispensable product, essential for the day-to-day work and living activities. Changes in designs, improvements in technology, emergence of more suitable materials... have resulted in the modern car to be elegant, reliable and relatively cheap, considering the purchasing power of people in most countries. One of the most outstanding features of the modern automobile is the continuous reduction in its consumption. Consumption has been declining steadily as engine designs have improved. This will save a great deal in energy resources and will help the environment by reducing pollution: competition is fierce and the minimum limits on requirements are very high. A recent development in this industry, which has emerged during the last few decades, is the shifting of production centers from advanced industrial countries to developing nations.

Today cars, buses and trucks of all sizes are produced in most of the countries of the world, where there is high demand for vehicles and/or where there is cheap labor. The developing countries which needed motor vehicles but could not easily afford them, challenged the monopoly of the manufacturers. At the same time manufacturers were faced with difficulties caused by high labor costs. So, the technology was transferred to developing countries. Initially production in such countries was restricted to assembly lines which made the host country highly dependent on the country providing the technology and parts. But ultimately some of these countries became independent manufacturers and others are trying to become so.

Studies thus far carried out indicate that the auto-industry must pass through six stages before it flourishes:
1- Production through assembly of parts and components
2- Setting up design centers for designing auto parts
3- Setting up design centers for designing new automobiles
4- Renovation of the part manufacturing network
5- Creation of export bases
6- Design and manufacture of machinery and equipment for use in the production lines.

Most of the countries that have developed strong auto industries have more or less gone through these stages, passing from one stage to another on the basis of the proper studies made in stage n for moving to stage n+1. Thus, they have managed to compete in a fierce international market. Those countries that opted for self-reliance and independence in auto manufacturing soon found out that the developments, the research and experience gained in this sector, have greatly helped their other industrial sectors and have resulted in more effective management.

Since the auto industry creates demand for the products of upstream industries, such as tools, equipment, casting, steel, glass, plastics, aluminum, foundry, elaborate machining, electronics... it shall result in investments in these industries and create many more jobs. The most effective aspect of auto production is the need for design and development of parts. This causes the level of technical and design abilities of engineers to rise. The history of car manufacturing in Iran goes back to 1962 when a company by the name of Iran National was established. It set up ball-bearing, piston and roller-bearing units. Later the production of diesel engines was begun in Idem Plant in Tabriz and Iran National (present day Iran Khodro) began to produce car bodies by mould-shaping and pressing. The industry was then heavily import-dependent and did not make rapid progress.

From 1979 to 1990 there was a heavy decline in the industry caused by the Revolution and the Iraqi war. Consequences of the war and political reactions of the West to the Islamic Revolution caused this industry to stagnate during the 80s. In 1990, however, the auto industry was given a great deal of attention as serious efforts were made towards industrial and economic development. The auto and auto part industries expanded rapidly, backed by a 1992 Act which supported the industry effectively. The Act prohibited import of finished cars except in a few cases (such as students returning home).

The need for more and better cars imposed an inevitable rise on the abilities, and demanded up-to-date means and facilities. Thus the industry shifted from stage 1 (assembly) to the next stages. The Third Development Plan (2000-2004) emphasizes on increasing the production capacity up to 500,000 units a year. It also aims that by the end of the Plan the industry shall gain all the foreign exchange it requires for its imports, from its exports. Although the future of the automobile market looks bright, heavy investments made by giant companies shall put Iran at a position of disadvantage. This means that Iranians will have to work harder and be more innovative.

Meanwhile a great deal can be done in auto part manufacturing and exports. There is great room for creation of companies and plants for manufacturing parts both for the export and domestic markets. Africa alone offers Iran a great future since the continent's demand is expected to increase by 100% by the year 2015. It is easier to export auto parts than finished cars, and it is often pointed out by experts that possibilities for investment in this sector are endless. To give the reader some idea of the international auto market: in 1998, over 100 billion dollars (over 3% of the total world production) was spent on the purchase of 50,500,000 vehicles; and in the same year 100 million people were employed directly in this industry; it is estimated that in 2000 the number of vehicles bought will rise to 60 million and that most of the increase will go to developing countries of Asia and Africa. It should also be noted that consumption of parts for each car covers a period of 5-6 years in the advanced world and 10-15 years in the developing countries. Investment in export-oriented manufacturing of auto parts: in designing, engineering and production, using high technology and effective modern management, requires joint ventures. In this regard, in Iran will surely prove a highly profitable place to invest in.

Iran is presently capable of producing various types of motor vehicles – cars, buses and trucks – of high quality standards. It can also export the technology required for auto production. As a first step in exporting this technology, Iran's policy-makers have chosen the Republic of Azerbaijan as a target market. This is because the Republic is expected to enjoy a high GDP and a strong economy within the next few years. It is expected to have a much higher per capita income in comparison with other Caucasian and Central Asian countries, the group of countries to the north of Iran. The Iranian automotive manufacturer, Iran Khodro, has already invested some 28 million dollars in this Republic and it is in the process of concluding another contract for the year 2001 regarding the sale of 300 buses. The 16,000 trucks that made up the Republic's fleet in 1992-3, have worn out by now and the authorities prefer to buy new trucks rather than waste money on parts and repairs for trucks that are almost obsolete. The major difficulty for Iran, in selling vehicles abroad is the supply of parts, and the provision of after-sales services. To solve this problem Iran Khodro has created a mobile repair unit in Baku.

In 1998, sales and production of Iranian vehicles amounted to 8,880 billion rials and created 235,000 jobs. This indicates that the automotive industry can play an effective role in reducing the rate of unemployment in Iran. As more cars, buses, and trucks are produced, there will emerge many more upstream industries providing parts and accessories.

Parts produced in Iranian factories and workshops have been improving in quality and becoming more competitive such that presently a considerable quantity of auto parts are being exported from Iran. Today, there are 300,000 to 400,000 people directly or indirectly engaged in the production of auto parts, a good deal of which is exported and brings in considerable amount of foreign exchange. The development and expansion of the country's automotive industry helps develop many affiliated industries

Iran Khodro also sold to the same Republic 155 city buses, worth 24 million dollars, of which five are double-deckers, 30 are model 320 Mercedes Benz and 120 are model 457 Mercedes Benz. Following this deal, there was another protocol for the sale of 120 mini-buses, worth 1,750,000 USD; and another for 50 Peugeot 1600RD automobiles worth 300,000USD. To establish a firm place in this market, Iran Khodro has set up an assembly line in the Republic of Azerbaijan to produce annually 500 buses, eventually expandable to 1500 buses, coaches and minibuses. The Republic of Azerbaijan has granted Iran Khodro a customs exemption of 38%. There will only be a 5% tax on parts imported. Since there is no customs duty for goods moving among the CIS countries, whatever Iran produces in Azerbaijan Republic will compete with foreign imported vehicles in other CIS states as well. The production of Iranian vehicles outside Iran, means more jobs inside the country, as more parts will have to be produced and shipped abroad. The automotive industry is a very important economic sector in Iran providing 2.5% of the total GDP and 18% of the production by value of the industrial sector.

such as the metal industry, the chemical industry, the textile industry... to count but a few. There will be many people repairing cars, painting them, fixing punctured tires, changing window glasses...