An expert reviewed the Industries, Mining and Trade Ministry’s document on the domestic automotive industry’s reform strategies and said a lack of a clear executive plan is its main flaw.
“The production of 1.6 million cars, car price reduction, the rise in the production of all types of cars, completing cars with parts deficit, paying attention to the purchasing power of customers and improving the quality of domestic cars are the positive points mentioned in the document on the transformation of the car industry,” Mohsen Razmkhah was also quoted as saying by Khabar Khodro.
The document was presented at the Transformation of Automotive Industry Exhibition held at Tehran’s International Fairground on Aug. 25-28.
“To achieve the above-mentioned goals, the Industries Ministry has adopted strategies for importing technology and incorporating innovation in car design and manufacture, reforming the structure of car value chain, creating synergy among car manufacturers and suppliers, prioritizing the joint investment of foreign automobile manufacturers, reforming the financial structure of car companies, financing the supply chain of the automobile industry and helping large component producers,” he added.
Referring to ambiguities in the automotive reform document, he said the strategies defined by the Industries Ministry lack a clear executive plan because no specific source of capital, schedule and authority have been determined for their realization.
“For example, the production of 3 million cars by fiscal 2025-26 is not possible, because most people cannot afford to buy cars worth over 2 billion rials [$6,323], while a majority of domestic cars are priced higher than this figure,” he added.
The automotive expert stressed that increasing car exports is one of the other goals set in the document without paying attention to the country's international and political relations.
“Because if the sanctions are not lifted, measures such as purchase of knowhow, creating design and innovation capabilities in car manufacturing and buying advanced production machinery in the car and parts manufacturing will have to be ruled out, as export cars will become unlikely,” he added.
Razmkhah noted that even though bank facilities are the best way to finance car manufacture and supply chain, and reduce production costs, the role of the banking system in production has been neglected.
“To achieve its desired goals, the automobile industry needs to purchase technical knowhow and import technology, and the component industry needs to purchase advanced machinery to produce high-quality products, which unfortunately has not been considered in the automobile transformation document,” he said.
Domestic Carmakers Unable to Accomplish Production Goals
The policy of domestic car manufacturers changed this year from increasing turnover to completing cars with parts deficit, Saeed Madani, the former CEO of SAIPA, said.
Automakers managed to complete most cars, but it resulted in a decline in production.
“Car manufacturers claim that in the future, they will not produce incomplete vehicles. Apparently, the production process has improved, but I don't think car manufacturers will be able to compensate for the low turnover of last year in the remaining six months of the current year,” Madani was also quoted as saying by Khabar Khodro.
Major carmakers set a goal of producing 1.4 million vehicles by the end of the current fiscal year (March 2023), but statistics indicate that these companies only produced about 500,000 new cars that are far from their goal.
“In the first three to four months of the current fiscal year, the implementation of the plan to complete cars with parts deficit caused a decline in production, as carmakers used parts allocated for daily production,” he added.
The former CEO of SAIPA stressed that the country’s production capacity should be increased to compensate last year’s low turnover.
“Calculations indicate that car manufacturers need to increase turnover by 50-60% to achieve the goal of producing 1.4 million vehicles this year. But because in the first six months of the year, the rise in turnover was not in accordance with their plans, carmakers should boost their monthly production by 90%. In other words, carmakers should double their production,” he said.
Madani estimated that carmakers can only produce about 1 million vehicles by the end of the year.
Cooperation of Two Major Carmakers
Industries, Mining and Trade Minister Reza Fatemi-Amin recently unveiled a new domestic economy car at the Automobile Industry Transformation Exhibition.
According to the minister, Iran Khodro and SAIPA, the two major Iranian automakers, will cooperate in the production of this vehicle, which currently has not been named, in the sixth month of the next fiscal year (Aug. 23-Sept. 22, 2023).
This economy car is a Class A vehicle with a maximum horsepower of 70-75, a maximum engine torque of 90-100 Newton meters and a distance of 2,430 mm between its two axles, Tejarat News reported.
According to the preliminary announcement, the car in question will look like SAIPA’s QUIK, be priced under 2 billion rials ($6,745) and roll out in the second half of the next fiscal year that starts on March 21, 2023.
In the last few years, the prices of domestic cars have skyrocketed to such an extent that they have become unaffordable for most people and the low quality of these high-priced cars also triggered the criticism of the Islamic Republic of Iran Police.
Despite their unreasonably high prices, domestic vehicles are in demand, as the purchases are made with the intention of making investment for earning a quick profit.
