Azernews.Az

Two major Iranian auto production companies and Chinese auto companies have agreed on production of Chinese cars in Iran, ISNA news agency reported.

Under the agreement, each of the Iranian two car production companies will manufacture one Chinese car model in their subsidiaries.

Iran's auto sector hopes to neutralize U.S. sanctions effects with Chinese companies' help, while experts argued that, cooperation with Chinese auto production companies is a short term solution and will be effective in long term.

In an executive order, the U.S president approved sanctions against people who do business with Iran's auto sector, which the White House said was a major source of revenue for Tehran.

The order authorizes sanctions against those who sell, supply or transfers to Iran goods or services that aid in making light and heavy vehicles such as passenger cars, trucks, buses, minibuses, pick-up trucks and motorcycles.

The sanctions focused on the auto sector also target foreign financial institutions.

Earlier, South Korean companies have officially announced that they will not accept orders from Iran for selling car parts to them.

According to projections, the sanctions will lead to a 40 percent rise in production costs in Iranian car-making companies as Korean suppliers used to provide Iranian companies with 60 percent of their needs.

Major European car companies including Renault, Peugeot and Fiat also halted their activity in Iran.

Iran's auto production decreased by 56 percent in May compared to the same period in 2012 and it's auto export dropped from about 6,000 in March 20-May 20, 2012 to 1,000 cars in same period in the current year.

According to the statistics, about 69 auto manufacturer units have been closed and 115,000 people lost their jobs in auto sector during the past two years.