Problems related to high prices of low quality car components can only be fixed by increasing the quality of parts used in domestic cars, or by after-sales service networks, automotive experts say.
In a meeting with parts manufacturers, SAIPA’s CEO Mohammad Ali Teymouri criticized the current situation of after-sales services and stated that the cost of providing services and supplying components in the after-sales service network is higher than the market rates, Donyaye Khodro reported.
According to the Persian economic daily Donya-e-Eqtesad, SAIPA’s new CEO was appointed on Jan. 12 and that of Iran Khodro Company (IKCO) on Jan. 29.
“Under the circumstances, we cannot expect customers to use our after-sales services,” Teymouri added.
Stressing that the shortage of parts at the dealership level is a major challenge that needs to be addressed quickly, SAIPA’s CEO said, "The supply chain plays a key role in strengthening the after-sales service network and it is possible to increase customer satisfaction by providing quality parts and delivering them on time."
Lack of liquidity and components, in addition to problems afflicting production lines, has affected after-sales services. Just as some vehicles are marked "incomplete" by producers due to the lack of some components and dumped in factories' parking lots, some cars are also kept in after-sales service agencies and they can only be cleared when marked as "incomplete" or "defective".
Some of the assembled foreign vehicles lack parts due to the termination of the cooperation of foreign automakers and their non-fulfillment of service obligations while domestic vehicles also face component supply problems in the after-sales service networks.
The new CEOs of the two major Iranian carmakers have placed the speedy completion and sale of incomplete cars on the agenda. They have also announced plans to improve after-sales services to meet quantitative and qualitative goals and make prompt deliveries to customers to increase public satisfaction.
However, this requires the allocation of liquidity to automakers who should adjust the purchase price of parts by automakers. It is ironical that despite the low purchase price of parts by automakers, they supply those parts in their after-sales service networks at a price higher than those in the open market.
Automotive experts recommend that automakers reform and upgrade their structures to achieve a competitive price in the after-sales service sector and more importantly make efforts to increase the quality of parts offered to customers.
Car Pricing Reformation
Any successful car pricing reform should narrow the wide gap between a car’s factory and market price.
"It is important to first take actions [and remove this difference], in order to rectify the current situation,” according to a member of the board of directors of the House of Industry, Mines and Commerce.
Arman Khaleqi added that the government should intervene to root out the rise in car prices, Khabar Khodro reported.
“The presence of the government in this industry as a policymaker for enforcing market control and pricing is not justified under the circumstances where car manufacturers are producing at a loss. While these companies are considered private, their management is public-oriented,” he said.
Khaleqi noted that as domestic automobile companies are state-owned, the pricing method inflicts losses on the treasury, otherwise it will be considered government intervention in the management of private companies.
He called on the government to analyze the reasons for the increase in market price compared to the factory price and announce the result clearly.
"Part of the increase in car prices, according to component manufacturers and automakers, is due to the high prices of raw materials, mainly petrochemicals and steel. This is while the high price of cars cannot be due to the high prices of components,” he said.
“In some cases, based on their contractual obligations, automakers may not accept the rise in price from component makers and the component makers will be forced to sell parts at a loss. In a balanced market, the imposition of losses on component companies would be unacceptable.”
The official stressed that if the sale of parts to automakers does not result in a loss or is supplied in proportion to the final cost, the automakers’ profit must also be included in the final price of the car.
Khaleqi declared that regulators must accept the situation and stop forcing carmakers to sell their vehicles at a loss.
Automakers Seeking Liquidity Boost
The two major automakers are negotiating with banks to boost liquidity for increasing their production by 260,000 units in the fourth quarter of the current fiscal year (Dec. 22, 2021-March 20), according to a member of the board of directors of the Association of Homogeneous Propulsion Industries and Component Manufacturers.
“Following the change of CEOs of the two major automakers, negotiations have been held with banks to provide 50 trillion rials [$189.39 million] to each of the automakers. This payment will be used to complete the incomplete cars and increase car production. However, so far, no talks have been held with component makers to increase production,” Reza Rezaei was also quoted as saying by Khabar Khodro.
