Iran’s automotive output increased by 9.4% during the first three months of the current Iranian year (March 20-June 20) compared to the year-ago period.
According to data released by the Industries Ministry, 336,699 cars and commercial vehicles were produced in Iran during the three-month period. Last year, the figure was 307,666. The output of passenger cars saw a 9.3% rise, increasing from 290,877 to 317,810 this year.
Production of passenger vans also increased from 210 to 224, registering a 16.2% rise. The upward trajectory is also seen in the production of pickup trucks.
During the three-month period, the number of pickup trucks produced by domestic automakers reached 14,080, which is 8.2% higher than the same period of last year, when the figure barely exceeded 13,000.
The statistics of heavy-duty vehicles show a 27% rise in output. According to the Industries Ministry, 3,848 commercial vehicles were produced during the three months. Last year, the figure was 3,030.
The highest increase was recorded in the production of bus and minibus. The number of vehicles grew from 211 last year to 488 this year, registering a 131.3% rise.
This is the first time since May 2019 that the ministry has released an auto production report. During last year, analysts were in the dark, because the ministry stopped releasing auto production data due to consecutive declines.
Since last year, the data were extracted from financial statements submitted by automakers to the domestic stock exchange.
Mismanagement, corruption and the pressure of US sanctions, now coupled with the Covid-19 outbreak, have derailed Iran’s auto industries.
SAIPA and IKCO have grappled with numerous scandals over the past few months, including the arrest of several managers of the two companies on charges of implementing an unauthorized price hike and committing fraud.
Industry insiders and local media have speculated that the two companies are on the verge of bankruptcy and, as usual, need the government to help bail them out to save thousands of jobs at risk in the chronically dysfunctional automotive companies.
Shrinking Options
The types of cars available to Iranian customers have declined after the US reimposed harsh sanctions against Iran in the summer of 2018.
Almost all foreign partners of Iranian carmakers pulled out of the country after US sanctions targeted Iran’s automotive industries.
Even international auto parts makers with decades-old ties halted sales to Iranian firms, as the US embargo threatened Iran’s access to US markets and disrupted the latter’s international banking relations.
As a result, even if a foreign firm wished to work with domestic companies, Iranian payment for the goods and services could not get through. All these have taken a harsh toll on Iran’s auto producers and assemblers.
Therefore, the production of 20 car models has been halted over the past year. Some of the cars assembled in Iran, such as Renault’s Sandero and Sandero Stepway, as well as Suzuki’s Grand Vitara, have stopped rolling out of Iran Khodro Company (IKCO).
IKCO also produces Chinese Haima and Dongfeng models, but the company is yet to announce whether it would be able to sustain the production of these models.
The Iranian firm also produces several Peugeot models, including 405 and 206. Reportedly, IKCO will be able to continue the production of 206 and 405 since it has been making them for decades and only relies on the foreign supplier for some key parts.
SAIPA, the other major automaker in Iran, also used to make several models in collaboration with China’s Brilliance Auto Group and South Korea’s Kia, the production of which has stopped.
Pars Khodro, the third main carmaker, has halted the production lines of Renault Sandero and Logan.
South Korea’s Hyundai Motor also had a deal with Iranian private carmaker Kerman Motor to produce Hyundai i10 and i20 in Iran, which partnership has been suspended.
Several other Chinese brands were assembled by private Iranian automakers, such as BYD, Great Wall, MG and Lifan, which have entirely stopped their production activities in Iran.
Poor Performance
Despite an automotive background of nearly six decades and a four-decade-long history of auto management since the 1979 victory of the Islamic Revolution, the sector has remained under state control and failed to stand on its own feet.
Although the Industries Ministry has imposed hefty tariffs on car imports and domestic automakers charge exorbitant prices for their substandard products from presales, Iran’s highly monopolized automotive sector is chronically bankrupt.
Buckling under the burden of US sanctions, Iran’s auto production was plummeting since June 2018 until recently.
Recently, Mohammad Reza Najafimanesh, a member of Tehran’s Chamber of Commerce, told reporters that Iranian automakers will miss output goals they had set for the current fiscal year (started March 20), amid the coronavirus pandemic and US sanctions.
Najafimanesh said IKCO and SAIPA’s debt to auto parts makers has reached 71.5 trillion rials ($357.5 million). He added that the country’s auto sector will only survive, if the government were to extend financial help.
Local news outlets have mentioned contradictory figures as car manufacturing companies’ debts to parts makers. These debts have not been mitigated by the regular price hikes.
As long as the Iranian automotive sector lacks accountability and depends on state financial assistance, it will continue to earn the wrath of the general public because of their costly and substandard vehicles.
