All domestic car companies must from now sell through the national online car ordering portal, sale.iranecar.com, the so-called National Competition Council said Monday.
In the past few months some companies had been allowed to offer limited models via the Iran Mercantile Exchange, which apparently led to controversy and complaints reported in the local press and social media.
Defending its unexpected decision, the council said monopoly in the chaotic domestic car market has increased. “The high Herfindahl-Hirschman Index (HHI), rising demand in the market, the ban and/or restriction of car imports over the past several years plus limited options for car buyers” has made a bad situation worse pushing up car prices to historic highs.
All passenger cars, including locally-manufactured, assembled and imported have now been singled out as “susceptible to monopolies” by the council, subject to the latest notice by the council and are banned from sale via the IME, Tasnim News Agency reported.
A key feature of the order is Article 5 of the ‘Conditions of Supply Side’ based on which carmakers must register and sell their vehicles only through the sale.iranecar.com portal.
End of Advance Booking
Also, car manufacturers do not have the right to take advance bookings, as in the past, for cars lacking the final price. Such bookings are allowed only when the vehicle prices are final and known to the potential buyer.
Car companies are also required to announce their monthly production/output programs to the National Competition Council and to the Ministry of Industries, Mining and Trade at the beginning of each year.
The ministry is responsible for the regular monitoring of the companies’ production plans and detect lapses. It will offer proposals and solutions to the related carmakers to help address their problems and challenges and inform the results to the council.
The ‘Consumers and Producers Protection Organization’ also regularly monitors the supply situation and obligations of producers and submits the said report to the relevant bodies.
“To improve competitiveness and improve car supply, the competition council in cooperation with the Industries Ministry will also decide on the type and number of imported cars,” the council said in the directive.
Changes in car prices due to the installation of optional accessories or parts that are not mandatory (as per legal requirements) must be reported to the Consumers and Producers Protection Organization and its price impact sent to the competition council for approval.
To help facilitate market access to genuine car buyers (as opposed to the army of avaricious dealers and middlemen) carmakers must feed data on their advance bookings, prices and all other relevant details online so that buyers can make informed decisions.
Up until recently companies were selling cars through what came to be known as “car lotteries” and via the IME.
U-Turn
Although auto offers via the IME faced challenges at the beginning of the current fiscal year (ends in March) and opposition from the Industries Ministry, the ministry had a sudden change of heart. It came out in support of the IME process calling it “important for car supply” in coordination with the Stock Exchange Organization (SEO).
The IME sale plan was launched with some Chinese brands and other cars not in high demand. The two state organizations were apparently opting to supply bigger volumes of quality vehicles.
Some cars such as the 1,000 Peugeot 207 were sold via the IME as one of the first mass-produced cars. Soon after other companies followed.
In fact, domestic manufacturers were gradually moving toward sales through the IME. For instance, SAIPA, the second major carmaker, put an end to the lottery system and restricted sales only through IME.
Diverging Views
While some economists and market observers say selling vehicles via the IME can and will eliminate the controversial command pricing structure and should be pursued, others say the process is open to manipulation and rent-seeking.
New vehicles now being imported were also supposed to be offered via the IME. After a five-year ban, car imports were approved by the government’s Economic Council last May with new terms and conditions.
One of the conditions is that the imported cars must be offered through the IME, which earlier announced plans to sell 21,140 vehicles.
When the policy to sell foreign cars under IME rules was announced, analysts were soon to point out that imported brands cannot be considered ‘economy cars’ and their sale by IME will do little, if anything, to curb the high and rising prices in the domestic auto market.
Many observers rightly note that if the past is anything to go by, the primary benefactors of the resumption of car imports (as is the case with most other imports) will be the rich, middlemen and vested interests close to the state and government.
