Following the announcement of the plan to sell 1,000 Peugeot 207 models on the Iran Mercantile Exchange, experts believe this is a sign of the Industries, Mining and Trade Ministry’s intention to liberalize car prices.
The Industries Ministry has announced that the plan, launched on Nov. 21, is to deliver the cars on Feb. 19, 2023, Tasnim News Agency reported.
While some believe that the new mechanism can have a good impact on the domestic market, an automotive expert believes that it could be manipulated to result in more rent-seeking, in which case the sale of cars at factory prices would remain the best option.
The supply of Peugeot 207 cars could be a turning point, as the domestic automotive industry is belatedly embracing the sale of cars through IME, Donyaye Khodro reported.
It seems that the new sale mechanism is to get rid of command pricing and liberalize car prices, the success of which could lead to the supply of other cars via IME.
Saeed Madani, the former CEO of SAIPA company, said one should wait for the results of this mechanism to predict the future course of action.
“It is possible that with the supply of these cars in the commodity exchange, car prices will decline and the government will stop command pricing. It could lead to price transparency and eliminate lotteries, brokers and profiteers who make huge profits from automovile sales,” he said.
Madani noted that the car supply plan via IME was implemented with the aim of testing price liberalization.
“With the end of command pricing, supply and demand will be balanced, and buyers will not buy low-quality products just to make a profit. In such a situation, the car manufacturer will be forced to upgrade their products, or reduce car price,” he added.
Policy Turnabout
Although the supply of cars via IME faced challenges at the beginning of the current fiscal year (started March 21) with the opposition of the Ministry of Industries, Mining and Trade, the latter changed course and declared it an important plan for car supply with the coordination of the Stock Exchange Organization.
The plan was launched with a low supply of Chinese products and vehicles with poor demand, but the two organizations are opting to supply a higher volume of better vehicles.
Madani pointed out that apart from Peugeot 207, no other mass-produced cars have been sold on IME and it is not possible to predict whether the command pricing will end.
“If we don't move toward car price liberalization with the sale of mass-produced cars via IME, we will see a multiple increase in car prices, which will also fuel rent-seeking in the market,” he said, stressing that in such a case, the supply of cars at the factory rate (command pricing) will be the best way to sell cars.
At the end, Madani said the best way for the domestic automotive industry and market is completely clear, which is to eliminate command pricing, and all measures must be taken to achieve this objective.
