SAIPA, one of the two major Iranian automakers, plans to increase auto output by 25% in the next fiscal year (starting March 21), despite facing several problems, including its mounting debts to component makers.
As of Jan. 13, 50,000 vehicles have been invoiced and an additional 39,000 vehicles were delivered to customers, which is 19% higher compared with the average of the last 10 months, SAIPA News reported.
Since one of the issues that Industries, Mining and Trade Minister Reza Fatemi-Amin broached to the new CEO of SAIPA was to wrap up incomplete cars, this issue has been placed on top of its agenda.
According to the Persian economic daily Donya-e-Eqtesad, SAIPA’s new CEO, Mohammad Ali Teymouri, was appointed on Jan. 12.
The carmaker had earlier made a commitment to reduce costs and meet customer demand for cars during the Norouz (Iranian New Year) holidays that start on March 21.
Due to the Covid-19 pandemic and the global chip shortage, the global car production has declined by 19% over the past two years.
Automakers Main Problems
Liquidity problems and automakers’ debts to component makers are among the main problems currently facing car producers.
“Pricing control has gradually weakened the financial capacity of automakers and if the facilities of the Monetary and Credit Council are not approved, the downtrend in the current production of automakers is highly likely,” Ahmad Nematbakhsh, secretary of the Iranian Vehicle Manufacturers Association, was quoted as saying by Khabar Khodro.
“Last week, it was planned to provide facilities worth 100 trillion rials by the Monetary and Credit Council equally to the two major automakers of the country [IKCO and SAIPA], which unfortunately has not been approved yet. Therefore, there is concern that production will decrease in the last month of the current fiscal year due to the lack of liquidity.”
The official pointed to the increase in parts manufacturers’ debts amounting to 400 trillion rials.
“If the needed components are not supplied, then the automakers will face a problem in their production as well as in completing the 120,000 unfinished cars,” he added.
Automakers Seeking Liquidity Boost
The two major auto companies are negotiating with banks to get loans for increasing liquidity, in order to boost production.
It had been planned to increase car production by 260,000 units in the Q4 of the current fiscal year (Dec. 22, 2021-March 20) while the liquidity of component makers has plummeted, according to a member of the board of directors of the Association of Homogeneous Propulsion Industries and Component Manufacturers.
“With the change of CEOs of the two major automakers, it seems that negotiations have been held with the banks to provide 50 trillion rials [$189.39 million] to each of the automakers. This payment will be used to complete the unfinished cars and increase production. But so far, no talks have been held with component makers to increase production,” Reza Rezaei was also quoted as saying by Khabar Khodro.
“The automotive and component industries are strategic and account for a large share of sustainable employment, as well as economic and trade development of different countries. Therefore, the two industries receive special support in the world. But unfortunately, Iran’s automotive industry is very complex and component manufacturers are one of its complex links.”
The official noted that in the past decades and under different managements, not only there hasn’t been any support for component manufacturers, but automakers have also blamed many of their problems on component manufacturers.
He added that the accusations that parts manufacturers are to blame for the poor quality of domestically produced cars are not true.
“Parts manufacturers gained a special place for the country by importing new technology and knowhow of parts manufacture. They could make parts for cars like Mercedes-Benz and BMW, if they are supplied with quality raw materials, infrastructure and production inputs,” he said.
“Delays in paying the dues of component makers have had a big impact on them, while component makers are not respected and have no place in the country.”
According to Rezaei, the direct and indirect claims of parts manufacturers have reached 900 trillion rials ($3.41 billion).
This is more than double the amount mentioned by Nematbakhsh earlier in this report.
“The government has reduced the banks' liquidity by 80% since the ninth month of the current Iranian year [Nov. 21-Dec. 21]. As a result, the payment of the dues of parts manufacturers through the purchase of debt and by the banks has also been limited,” Rezaei said.
