Effect of localization on the sustainable development in Iran's car industry

Abstract

Iran's economy has always been under severe sanctions. These sanctions were almost tolerable for Iran since they did not affect Iran's oil industry which is the main source of foreign currency for the country. The recent sanctions on Iran's oil-dependent economy starting from 2012, put a lot of pressure on the country and the overall country experienced very volatile conditions. As the result, the government started to negotiate with the world that led to the agreement between P5+1 and Iran that is generally referred to as the Joint Comprehensive Plan of Action (JCPOA). Although this agreement released some of the pressures on Iran's economy, Iran's experience during the sanction period and the time that the oil price was low, convinced the government to start investing on localization of the industry. The term localization here refers to the activities that try to produce needed materials of the industry inside the country instead of importing them. The government's attempt in the past years for localization especially in the car industry, caused a sustainable development in this area. This sustainability was shown in the recent drop off of the oil price in 2016 which did not affect the car market like the past similar events. In this paper, we will try to model the effective parameters in Iran's car industry including the localization and also propose a model relating localization, car industry and sustainability to describe the effect of localization on creating a sustainable development in the car industry.