Article page new theme
Auto

Privatization of Two Iranian Automakers in the Final Stage

Currently, judiciary experts are calculating the market value of the assets of SAIPA and Iran Khodro for privatization since fiscal 2021-22

Minister of Industries, Mining and Trade Reza Fatemi-Amin said the privatization of SAIPA and Iran Khodro (IKCO) are in the final stage. 

"The determination of the market value of SAIPA and IKCO is underway since the fiscal 2021-22, but as the properties and assets of these two companies are scattered throughout the country, the valuation process has been slow," Fatemi-Amin said on the sidelines of the Iran-Russia Trade Conference on the latest status of their transfer to the private sector.

According to SAIPA Automotive Group, 42% of SAIPA’s shares held by its subsidiaries are ready for sale, Donyaye Khodro reported. 

As the initial pricing was done three months ago and in the last month of the previous fiscal year (Feb. 20-March 20, 2022), currently, 500 judiciary experts are appraising SAIPA's properties and 300 experts are valuing IKCO’s assets for privatization.

The minister said Iran Khodro’s shares will be transferred after SAIPA’s.

Referring to the timing of the full privatization of the two companies, Fatemi-Amin said, "At present, it is not possible to give a precise date for its completion, but the work is in the final stage."

Despite these statements, parliamentarians and automotive experts emphasize that the problem of carmakers is more managerial than ownership. 

A majority of the shares of the two automakers have already been privatized, but in practice, the companies continue to operate as government entities.

In other words, the ownership of these automakers’ shares has moved from the government to state-affiliated institutions and organizations, but the government sets the production target and appoints managers for the two companies.

Such a trend has caused the industry to always face the censure of experts and the dissatisfaction of customers. 

After officials were compelled to admit that the automotive industry is inefficient, they agreed to lift the ban on car imports. But as long as the key industry’s policies and management are not overhauled, there’s no hope for its reformation and prosperity.

 

 

Automakers Ordered to Submit Quality Enhancement Roadmap

Lawmakers have ordered Iran’s two major auto producers to submit roadmaps for enhancing the quality of their vehicles.

According to the Majlis news outlet, SAIPA and Iran Khodro have been given 72 hours to submit a roadmap to the parliament, in which they should elaborate on their plans for increasing customers' satisfaction, as well as the quality and security of vehicles.

Rouhollah Nejabat, a lawmaker, referred to the direct impact of domestic vehicles on the high number of road casualties and said lawmakers made the decision during a meeting with representatives of Traffic Police, Roads Ministry, Ministry of Industries, Mining and Trade, Iran Khodro Industrial Group, SAIPA and the National Standards Organization. 

In another update, Ezzatollah Akbari, another lawmaker, called on the government to prepare the grounds for the entry of private producers and foreign companies in the automotive industry, as it would help improve the industry's competitiveness. 

He also criticized carmakers for their irresponsibility and said carmakers must fulfill their commitments as per contracts that must uphold the interests of both sides.

Hojjatollah Firouzi, another lawmaker, also said the import of new cars could be a useful method for compelling domestic producers to improve their performance. 

"The entry of foreign cars in the market would help reduce prices and, at the same time, force domestic producers to improve the quality of their products," he said.

The measure follows widespread public complaints about the poor quality of domestically-produced cars.

The previous government had imposed a ban on car imports to prevent the outflow of foreign currency made scarce by US sanctions and lower oil sales in the fiscal 2018-19. However, the incumbent government has placed the import of 70,000 cars on next year’s agenda to meet its financial needs.

IKCO and SAIPA enjoy a near monopoly in the domestic market and so far, car imports remain banned. 

Iran's total auto output in the last Iranian year (ended March 20, 2022), stood at 963,179, down 2.9% year-on-year. IKCO posted a 6.7% decline in output last year, whereas the decline was 5.5% for SAIPA. 

One person dies in a road accident every half hour in Iran, taking the annual death toll to 17,000, the Iranian Legal Medicine Organization announced.

The organization also said close to 30,000 people are annually embroiled in accidents.

According to Majlis Research Center, the costs of road crashes amount to 8% of Iran’s gross domestic product. In the years ending March 2012 and March 2017, car collisions cost the economy 519 trillion rials ($2.1 billion) and 535 trillion rials ($2.17 billion) respectively.