Iranian automakers will miss output goals they had set for the current fiscal year (started March 20), amid the coronavirus pandemic and US sanctions, a member of Tehran’s Chamber of Commerce says.
Speaking to ISNA, Mohammad Reza Najafimanesh, who also heads Iran Auto Parts Makers Association, said the country’s auto sector will only survive if the government extends help.
According to Najafimanesh, major Iranian carmakers, Iran Khodro (IKCO) and SAIPA were slated to pay off 110 trillion rials ($687.5 million) as a part of their debts to part makers last year. However, they have only cleared 38.5 trillion rials ($240.6 million) so far.
Local news outlets have mentioned contradictory figures as car manufacturing companies’ unpaid debt owed to part makers.
After the US reimposed harsh sanctions against Iran in the summer of 2018, almost all foreign partners of Iranian carmakers pulled out of the country after US sanctions targeted Iran’s automotive industries.
Even international auto parts makers with decades-old ties with Iran halted sales to Iranian firms, as the US embargo threatened the former’s access to US markets and disrupted the latter’s international banking relations.
As a result, even if a foreign firm wished to work with domestic companies, Iranian payment for the goods and services could not get through. All these have taken a harsh toll on Iran’s auto producers and assemblers.
Buckling under the burden of sanctions, Iran’s auto production has been plummeting since June 2018.
COVID-19 Impact
The COVID-19 has been reportedly spreading in Iran since February, which has economically affected all businesses.
First reported in China’s Wuhan Province in December 2019, the coronavirus has so far infected nearly 2 million people worldwide, claiming the lives of 126,741. The number of recovered cases has reached 483,501, according to Reuters reporting on Wednesday.
From an international viewpoint, giant auto production companies have released hard numbers showing a deep decline in automotive sales in the first quarter of 2020, as analysts expected.
Since February, stay-at-home orders and shutdowns swept over the world in response to the coronavirus outbreak and BMW, Audi, Chrysler Automobiles, Ford, General Motors, Genesis, Honda, Hundai, Kia, Lexus, Mazda, Mitsubishi and Nissan are only a number of companies that reported a 15-40% decline in sales during the Q1 compared to the year-ago period.
As the novel coronavirus continues to spread across the world, automakers are taking extreme measures in the form of plant closures to halt the spread of COVID-19, the disease caused by coronavirus. The situation remains fluid, as more European companies suspended work and US automakers extended shutdown periods. Therefore, their sales rate is expected to decline further.
Iranian carmakers have not announced a shutdown or any related measure.
In Iran, the virus has so far claimed the lives of 4,683 people out of a total of 74,877 infected people.
According to Iran’s Health Ministry, 4,799 patients have so far recovered from the disease.
Only time will reveal how the already sanctioned and broken auto industry in Iran will handle the crisis.
Production Rate
In the last fiscal year that ended in March, 863,263 passenger vehicles were produced in Iran, indicating a 9.6% year-on-year decline.
According to a report published by Iran’s Securities and Exchange Organization on Codal.ir, Iran produced 92,660 fewer cars compared to the year before. No data have been released on commercial vehicle production.
IKCO produced 393,812 cars during the period, indicating an 8.1% YOY drop. The figure is 32,012 lower than the previous year’s output.
Besides passenger vehicles, IKCO manufactures commercial vehicles, including vans, pickups, trucks and buses. However, during the period under review, the company halted the production lines of several models of commercial vehicles.
The firm’s arch-rival SAIPA produced 363,379 vehicles during the year, marking a 13.5% year-on-year decline. The figure was 56,945 in the year before.
Pars Khodro produced 106,072 vehicles and registered a 21.4% decline. Last year, the company produced 134,958 vehicles.
Month-on-month comparisons also show that the production rate of all three companies has declined.
IKCO produced 35,953 passenger vehicles in the month ending March 20, registering a 20% decrease compared to the month before.
SAIPA’s output shrank to 23,696 vehicles, 18.8% less than the month before.
Pars Khodro also produced 9,300 vehicles in the month ending March 19, recording a drastic 92.6% fall compared to the previous month, when the company managed to produce 86,084 vehicles.
Previously, the Industries Ministry regularly published statistics about car production. However, following consecutive declines, the ministry stopped releasing such data.
The current data are extracted from financial statements submitted by automakers to the domestic stock exchange.
Mismanagement and corruption, plus the sharp pressure of US sanctions, have derailed Iran’s auto industries. SAIPA and IKCO have struggled with numerous scandals over the past few months, including the arrest of several managers of the two companies on charges of implementing an unauthorized price hike and committing fraud.
Industry insiders and local media have speculated that the two companies are on the verge of bankruptcy and, as usual, need the government to help bail them out to save thousands of jobs at risk in the chronically dysfunctional automotive companies.
The real extent of the impact of coronavirus on the domestic automotive industry will only surface when the manufacturers reopen for business.
