Higher raw material cost is the main reason behind the rising domestic car prices, according to a member of the Board of Directors of the Iran Auto Parts Manufacturers Association.
“Car prices are influenced by numerous factors, including economic conditions and liquidity situation, which are beyond the control of car manufacturers and parts producers. But the 60% increase in the prices of raw materials, such as steel, aluminum, copper and petrochemical products, last year is the main reason behind the increase in the factory prices of domestic vehicles,” Maziar Beiglou was also quoted as saying by Khabar Khodro.
“In addition to this increase, the growth of overhead costs due to electricity and gas outages in parts production units has reduced production and increased the costs of component manufacturers, because calculating the overtime pay of workers increases the overhead cost of each component,” he added.
Commenting on the effect of the skyrocketing foreign exchange rates on the prices of vehicles and parts, the official said, “Considering the high level of self-sufficiency, the rise in foreign exchange rate will not have a direct effect on the prices of raw materials [and on auto parts and cars] and won’t increase prices by more than 20%. But the 60% increase in raw material cost had a direct impact on the prices of components and cars.”
Beiglou noted that importing raw materials such as steel sheets from Russia is cheaper for component manufacturers than procuring them from domestic companies.
Referring to other problems, the official said parts producers sometimes face challenges in procuring raw materials from the commodity stock market when their supply stops.
“However, currently, the most important challenge regarding raw materials is their prices, the growth of which has destroyed the effect of price correction this year,” he said.
“Domestic parts manufacturers have the equipment, machinery, resources and manpower to produce parts for 2.2 million vehicles annually, but this volume of production requires liquidity and overcoming supply network challenges. Therefore, under the current circumstances of raw material supply and liquidity, it is not possible to achieve this production capacity.”
IKCO Will Not Increase Car Prices in Fiscal 2023-24
The factory prices of Iran Khodro Company’s (IKCO) vehicles will not increase in the Iranian New Year starting March 21, according to the company’s CEO.
“As per the budget bill of 1402 [fiscal 2023-24], all cars must be sold in the commodity exchange. We do not plan to increase the factory prices of our products, but we are looking forward to increase supply in the Iran Mercantile Exchange,” Mehdi Khatibi was also quoted as saying by IRNA.
“We’ll continue to offer cars on IME and believe that in the absence of an optimal solution, offering cars on the commodity exchange is the best option,” he added.
He said command pricing is one of the most critical problems plaguing the domestic automobile industry.
Stressing that the domestic automaker is expanding its cooperation with Chinese car manufacturers, the IKCO chief said a team from this industrial group went to China and a contract was signed between Iran Khodro Diesel and the Chinese side in the presence of IKD’s CEO.
“We are also hosting the CEO of Haima Automobile Company on March 8 and will follow up measures and cooperation with it based on our agreement,” he added.
Referring to the withdrawal of European car manufacturers over sanctions in the past, Khatibi said Iran Khodro considers such issues and problems in its policies and foreign partnerships.
“By 2030, new developments will take place in the world's automobile industry, and the Chinese will gain a major share of the world's markets. Based on this, our cooperation with the Chinese will be a worthy action and we would be included in the global chain of major car manufacturers,” he said.
He noted that Iran Khodro has no objection to importing cars, but whether Iran Khodro itself will import or not will depend on the decision of its Board of Directors.
“However, we are against the import of used cars and we don't know why politicians favor this move,” he said.
Commenting on the deadline of the Institute of Standards and Industrial Research of Iran regarding the application of 85 standards by July 22, Khatibi said, “We intend to maintain the production of popular cars and products with body changes, technical changes, etc. However, the production of Peugeot 206 car will be stopped temporarily until the standards are applied to it.”
