Two leading car manufacturers Iran Khodro and SAIPA are to offer 90,000 vehicles in the coming days to meet the overwhelming public demand for vehicles so as to help balance supply and demand to curb the exorbitant prices.
CEOs of the two car companies went on live national TV programs on Sunday night to voice their grievances and win the people’s sympathy by shedding light on the roots of the car price hikes.
One of the most important talking points of SAIPA CEO Mohsen Qasem Jahroudi was the announcement that the firm is to offer 50,000 vehicles through their website starting from 10 a.m. local time on Wednesday, a promise which was realized, however with some twists and turns.
Furthermore, Iran Khodro CEO Hashem Yekezareh said his company will put up for sale 40,000 vehicles starting from next week. He did not specify the models.
Jahroudi said they were to offer various models including the X100, X200, and the Nissan pickup family. X100 and X200 are other names for the low-cost models Pride and Tiba.
As with the previous online sales, SAIPA’s website crashed repeatedly, showing signs that precautionary measures have not stopped dealers from rushing in to gain access to factory-price vehicles which they will later sell at exorbitantly higher rates.
SAIPA has responded to the complaints by publishing a press release, saying that 6 million people have accessed the website simultaneously, which has led to the repeated crashes.
“The sale has been phased and every 15 minutes there is a 10-second window for those already viewing the website to initiate an online preorder. We ask for the public’s patience.”
Demand Outpacing Output
Pointing to the growing demand of the public for vehicles, Jahroudi said, “SAIPA was [easily] meeting the demands of the population before May when the dollar exchange rate hit unprecedented highs.”
Following US President Donald Trump’s pullout from the historic 2015 Iran nuclear deal, the dollar exchange rate experienced never-before-experienced highs and created vast demand for hard currencies and goods like vehicles which many consider as a relatively safe investment; and the sharp rise in demand surpassed carmakers’ already declining production levels, which in turn set car prices on a bullish run on the open market.
For instance, dealers are charging people over 450 million rials ($4,610) for SAIPA’s Pride, which used to be sold for about 200 million rials ($2,049) a few months ago.
Jahroudi says the 400 million rials ($4,098) price tag for the Pride is unacceptable but the government imposed price cap for the model is also unreasonable.
The government through Competition Council sets the price for certain products, including vehicles priced under 450 million rials ($4,610).
As for the delay in the delivery of vehicles jointly produced with Citroen, Jahroudi said the number of presold cars amounts to 2,000 and they have managed to acquire the necessary parts for manufacturing them.
SAIPA has established a joint venture with PSA Group’s Citroen brand which has been put on hold by the French automotive giant due to the reimposition of US sanctions against Tehran.
SAIPA CEO refused to acknowledge the production of C3s as an issue and instead pointed to another problem, making Renault products.
In addition to Citroen, SAIPA has had extensive ties with Renault. Just like PSA, Renault has been forced to downsize its operations in Iran.
“We used to produce 570 vehicles a day from the Renault family, but our current daily production output stands at 90.”
The shocking 84% decline speaks volumes about the state of the auto industry.
Conciliatory Tone
On top of IKCO’s announcement to offer 40,000 vehicles by the coming week, the firm’s director Yekezareh apologized for the delay in the delivery of the presold Peugeot 2008 to customers. Yekezare did not elaborate when the vehicles are to be delivered.
Just like SAIPA, IKCO has forged collaborations with PSA Group and were to make several Peugeot models in Iran. However, US sanctions have disrupted Peugeot-IKCO ties as well.
Moreover, the company CEO blamed the surging liquidity in the country for the disruptions in the auto market and dismissed profiteering accusations made by the Parliament against makers.
“The incomplete production of vehicles does not translate into stockpiling. Customers have made payments for the cars and we are obligated to deliver products.”
Yekezareh says if car manufacturers delay delivery of vehicles, they will be subject to a fine and have no reason to do so.
Question of Standards
Iranian carmakers have always been censured for the low quality of their products and flouting automotive standards. The piling criticism had goaded the Institute of Standards and Industrial Research of Iran to push for enhanced automotive standards.
Seemingly, the recent upheaval in the auto market has not steered the ISIRI away from its objective to improve the quality of domestic vehicles.
In recent years, ISIRI has pushed for the implementation of phased upgrades to Iran’s automotive standards known as the Islamic Republic Car Assessment Program (IRCAP).
The system is scheduled to come into full force by January 2019 and will include new regulations with the total number of automotive standards reaching 85.
Yekezare said they are working in coordination with the ISIRI, adding that “we are obligated to comply with the directives issued by the institution.”
Mayhem in Government
This past week brought many pieces of contradictory news that are signs of a divided government on the issue of vehicles’ price-setting.
While reports suggested that the Industries Ministry has permitted an increase in car prices and announced the elimination of the Competition Council from the pricing process, hours later the news was denied.
At the same time, head of the Competition Council Reza Shiva announced that they have not been convinced by carmakers’ arguments to sanction a second round of price increases in a year and have inquired about the sectoral inflation rate from the Central Bank of Iran to verify the car producers’ claims.
However, news coming from the Parliament on Wednesday morning led to the belief that the Competition Council has been stripped of its authority to impose price caps for cars and SAIPA’s offerings would be sold at new rates on Wednesday morning. At the time this article was published, this report was also rejected.
During times when any news can disrupt the unstable auto market, coordination between various state bodies is of paramount importance before another jump in prices forever denies the population from car ownership.
