Domestic production is one of the best options from among the three considered by the Ministry of Industries, Mining and Trade for supplying economy cars, according to a faculty member at Iran University of Science and Technology.
“The three options were production with domestic design, production with foreign design and import,” Javad Marzban-Rad also told Khabar Khodro.
Economy cars possess basic technology and simpler parts compared to luxury and high-tech cars, and have high demand mainly because of their low price.
“Economy cars cost under 3.5 billion rials [$11,006] that a majority could afford. The more features, engine power and technology the car has, the higher its price will be, which will also take it out of the economy car category,” the faculty member said.
Marzban-Rad, who is also an automotive expert, noted that considering their low-level technology, simple parts, high production volume, low price and rising demand, economy cars could be easily supplied by domestic automakers.
He explained that at the beginning, completely knocked-down (CKD) kits could be used for the production and assembly of economy cars, but later, the focus should be on domestic design and production, such that at least 80% of these cars are produced domestically.
CKD is a common practice in the automotive, bus, heavy truck and railcar manufacturing industries, as well as electronics, furniture and other products.
If Iranian automakers produce a large number of economy cars, they will create jobs and increase the share of parts manufacturers in the domestic production sector.
The automotive expert further said that if economy car production were to employ modern technology and acquire Euro 5 standards, those cars could also be exported to neighboring countries.
Commenting on rumors about importing economy cars worth $5,000-10,000 by the Industries Ministry, he said, “Economy cars worth $5,000 do not have high standards and will be of low quality. Importing a $10,000 car will cost about 7 billion rials [$22,012] after calculating the cost of transportation and customs duty, which will take it out of the realm of economy cars.”
Marzban-Rad concluded that an economy car produced domestically will have a lower price compared to imported cars because it won’t have to pay the customs duty, or use foreign currency to import parts.
Import of Cheaper Cars Will Hurt Domestic Automotive Industries
If the prices of imported cars are lower than those of Iranian cars, the domestic car and component industries will face problems, according to a member of the board of directors of the Association of Homogeneous Propulsion Industries and Component Manufacturers.
“In the field of imported car, the government is considering a special mechanism that sets higher or lower tariffs for cars with different engine power. Such a mechanism, while creating competition and improving the technical knowhow of car and parts makers, will not harm domestic production,” Alireza Khalili was also quoted as saying by Khabar Khodro.
“Cars that enter Iran must be at a price level that helps create balance in the domestic market, and create equilibrium in comparison with the prices of imported cars in the international market,” he added.
Noting that tariffs determine the price, the official said, “The prices of imported cars are naturally lower than the prices of domestic cars and what increases the final price is the [customs] tariff rate. Therefore, the establishment of balance in this field can prevent any harm to the domestic cars and parts manufacturing industries.”
Khalili stressed that the tariff rate should not interfere with the import of parts and raw materials.
Asked whether the priority is importing cars or parts, raw materials, technology, machinery and equipment, he said the ban on imports in the last few years deprived Iran of the latest technology.
“The current quality problem of domestic cars is due to the lack of access to machinery, state-of-the-art knowhow and good quality raw materials. If access to these resources is provided, many problems in the car industry will be solved,” he added.
In other words, the import of machinery and technology must be prioritized over car imports.
“There is a history of producing cars such as Jeep, Benz and Fiat in Iran, but problems in political relations have impacted the car industry’s condition. It is not possible to be content with just producing domestically. We should use the technological knowledge of foreign automakers to eventually increase the quality of domestic cars,” the official said.
Referring to Turkey as a manufacturer of cars and parts, as well as an automotive importer and exporter, he noted that studying and following the example of other countries' policies in the field of automobile manufacturing, in the long run, will turn Iran into an automobile manufacturing country with competitive products.
Khalili stressed that the government should ease car imports and currency transfer because the current unreasonable methods are associated with high risk and very low reliability, so the government’s flexibility can improve the situation.
