Lawmakers have ordered Iran’s two major auto producers to submit roadmaps for enhancing the quality of their vehicles.
According to the Majlis news outlet, SAIPA Group and Iran Khodro have been given 72 hours to submit a roadmap to the parliament, in which they should elaborate on their plans for improving customers' satisfaction, as well as the quality and security of vehicles.
Rouhollah Nejabat, a lawmaker, referred to the direct impact of domestic vehicles on the high number of road casualties and said lawmakers made the decision during a meeting with representatives of Traffic Police, Roads Ministry, Ministry of Industries, Mining and Trade, Iran Khodro Industrial Group, SAIPA and the National Standards Organization.
In another update, Ezzatollah Akbari, another lawmaker, called on the government to prepare the grounds for the entry of private producers and foreign companies in the automotive industry, as it would help improve the industry's competitiveness.
He also criticized carmakers for their irresponsibility and said carmakers must fulfill their commitments in contracts that must uphold the interests of both sides.
Hojjatollah Firouzi, another lawmaker, also said that the import of new cars could be a useful method for compelling domestic producers to improve their performance.
"The presence of foreign cars in the market would naturally help reduce prices and at the same time force domestic producers to improve the quality of their products," he said.
The measure follows widespread public complaints about the poor quality of domestically-produced cars.
The previous government had imposed a ban on car imports to prevent the outflow of foreign currency made scarce by US sanctions and lower oil sales in the fiscal 2018-19. However, the incumbent government has placed the import of 70,000 cars on next year’s agenda to meet its financial needs.
IKCO and the second major automaker SAIPA enjoy a near monopoly in the domestic market and so far, car imports remain banned.
Iran's total auto output during the last Iranian year (ended March 20, 2022), stood at 963,179, down 2.9% year-on-year. IKCO posted a 6.7% decline in output last year, whereas the decline was 5.5% for SAIPA.
One person dies in a road accident every half hour in Iran, taking the annual death toll to 17,000, the Iranian Legal Medicine Organization announced.
The organization also said close to 30,000 people are annually embroiled in accidents.
According to Majlis Research Center, the costs of road crashes amount to 8% of Iran’s gross domestic product. In the years ending March 2012 and March 2017, car collisions cost the economy 519 trillion rials ($2.1 billion) and 535 trillion rials ($2.17 billion) respectively.
Prerequisites for Increasing Car Output
Car production capacity could be increased by 50%, provided prerequisites created by growth in inflation should be put in place in the current fiscal year (started March 21), secretary of the Association of Homogeneous Propulsion Industries and Component Manufacturers said.
Arash Mohebbinejad also told Khabar Khodro that these prerequisites include providing liquidity to automakers, reforming the pricing system and amending the contracts of parts manufacturers.
“According to the forecast of all economists, the country will face high inflation in the fiscal 2022-23, so in an inflationary economy with a constant volume of liquidity, production will decrease. Therefore, if the output is to increase by 50%, the automotive industry needs to have the appropriate liquidity to compensate for inflation and increase production,” he said.
The official stressed that changing the sources of liquidity is one of the necessities, so reducing the payment period, obtaining bank facilities and using similar methods will help resolve the problems of parts manufacturers.
Mohebbinejad stated that command pricing causes production losses and creates obstacles to increasing car supply, which extends to the supply chain and if the whole enterprise is not economically viable, production lines will face the risk of shutdown.
“At present, the automaker does not fulfill its obligations to component makers and expects the parts manufacturer to fulfill all its obligations,” he said, adding that the contracts of automakers with parts manufacturers are unbalanced.
“In such an environment, a steady increase in the production of parts and cars cannot be expected unless the requirements and prerequisites are met, because only then, a steady increase in car production and quality improvement will happen,” he said.
Mohebbinejad noted that car pricing methods should be improved to increase production.
“Increasing supply and liquidity are all interdependent. A rise in supply will help fill the demand vacuum and reduce the gap between supply and demand, which will lead to price equilibrium in the market,” he concluded.
