It has been a month since Iranian e-commerce websites were barred from listing car prices. And now a section of local news outlets are reporting a “noticeable decline” in demand and prices, a claim which goes against the ground realities.
Following a sharp surge in car prices, the government and the judiciary pressured online sales websites like Divar, Sheypoor and Bama to stop listing car prices. Subsequently, certain media outlets began chanting the mantra of “tumbling car prices”.
Curiously, however, in the same stories, they contradict themselves by saying, “Racketeering dealers are pushing hard to prevent car prices from declining.”
In short, car price stories sell well, so the domestic press is aflush with auto market reports and predictions. Many outlets with vested interests, particularly those aligned with state-owned car companies, prefer to put a gloss on the latter’s poor performance. As a result, the twisted narratives of market developments are tantamount to fake news.
Nevertheless, seldom a day passes without flashy titles like “Car Prices Plummeting by the Hour” decorating the home pages of news outlets.
But in reality, the domestic market suffers from a sharp dichotomy: Demand for cars has not declined, but auto sales have been put on hold. While buyers hang on to the false hope of finding cars at low prices, sellers are unwilling to “underprice” their wares.
Targeting Online Platforms
In early May, the media frenzy over soaring vehicle prices led to the branding of online marketplaces as “dealers’ lair” and their prohibition against listing prices.
At the time, media reports said "profiteering dealers" create numerous accounts on sale websites like Divar, Sheypoor and Bama for posting several ads for a single vehicle by pricing the same car differently. Then they fake sales and repost ads about the same car again with higher prices.
Unaware of the fraudulent process, customers believe that prices are rising and rush in to buy vehicles at whatsoever rate they can lay their hands on.
The ban on listing car prices has remained in place, although a number of media outlets circulated stories that it has been lifted.
Twisted Narrative
Over the past year, car prices have more than doubled in Iran. The cheapest vehicle in the country SAIPA’s Pride is now sold for more than 520 million rials ($3,900), which model would not have fetched 220 million rials ($1,650) a year earlier.
The official narrative on soaring car prices is simplistic: Dealers have created market turmoil by faking price bubbles and are having a field day.
However, state authorities and news outlets floating this narrative fail to point out fundamental economic factors that have contributed to the sharp surge in car prices: plummeting output and increasing demand that have caused a gargantuan gap between supply and demand, which could derail any market, anywhere.
The same set of people, putting up a show of righteous indignation, also fail to note that prices of almost all goods have more than doubled in Iran; that economic developments are interrelated; that in a country where the national currency has lost more than 60% of its value, no one would expect the price of a single commodity to remain unchanged despite a galloping inflation.
The same tired and dilapidated rhetoric of branding the dealers lurking in the shadows as the main culprit was employed by the authorities and their PR agents, including imbedded journalists, to explain the upheaval in Iran’s forex market.
All these boil down to a simple fact: Iranian authorities’ immediate response to economic problems has been to sweep them under the carpet, instead of solving them.
Simple Facts
The imposition of harsh US sanctions against Tehran has squeezed the Iranian economy. Despite aggressive monetary policies, the Iranian national currency, rial, has lost two-thirds of its value and local import-intensive industries, such as car production, have been derailed.
In view of the raging inflation unseen in recent history, the panicked general public has rushed to convert their savings into safe haven assets, including hard currencies, gold coins and cars. This has boosted demand for all these commodities.
However, the story does not end here. Data released by Organisation Internationale des Constructeurs d'Automobiles show that there has always been an insatiable thirst for new vehicles in Iran’s auto market and local carmakers have never had a hard time selling their substandard and high-priced vehicles.
According to the data, the demand for cars has always been higher than local output. For instance, in 2017, Iranian car companies sold close to 1.5 million vehicles, while thousands of cars were imported and sold like hot cakes.
Add to these the nosediving output of carmakers, which has widened the supply-demand gap. Data gathered by the Industries Ministry reveal that in the last fiscal year (ended March 20, 2019), 955,923 cars and commercial vehicles were produced in Iran, indicating a 37.8% year-on-year decline.
Domestic car companies’ depleting auto parts reserves and their deteriorating ties with foreign suppliers will certainly not bode well for the industry. Independent observers have cautioned that car production in Iran is on a slippery slope and local firms’ output will soon sink further.
When demand increases and supply remains the same (or declines), this leads to a higher equilibrium price, which fact Iranian officialdom is either unable or unwilling to comprehend.
A hodgepodge of ad hoc policies and publicity stunts would not help curb car prices or calm the market. With these so-called strategies, the officialdom might be able to delay, but will certainly fail to avert the approaching crash in the auto market.
