As the first batch of imported cars are expected to enter the country soon, Iran Khodro Industrial Group (IKCO) has called for the elimination of command pricing in the domestic car market.
Following the listing of domestic cars in the Iran Mercantile Exchange, their prices have increased. Market players believe domestic automakers want to have more control over the market this way.
Asked to confirm this hypothesis, IKCO’s CEO Mehdi Khatibi denied that
IKCO and SAIPA are pursuing this agenda, Tasnim News Agency reported.
“Our goal is to increase the sale of cars through IME and to reduce the delivery time from three months to two months, and gradually to one month. Due to the Covid-19 pandemic, there was a crisis in the supply of chipsets and because of this issue, prices of cars increased worldwide by over 30% on average,” he said.
“The fact that the prices of [foreign] cars, especially the completely knocked-down [CKD] units currently available in the domestic market, are more expensive than in other countries of the region must be seriously pursued … All our efforts are aimed at supplying cars with higher quality and at a minimum price.”
The CEO noted that IKCO has no objection to car imports, but we request that command pricing be removed for the automotive industry so that we can compete with foreign vehicles and operate freely.
“If we want to pay attention to the import of completely built-up cars, the goal is to be able to achieve CKD production in the country after a while. Experience has shown that Iran Khodro has not been a successful importer,” he said.
“Iran Khodro is a manufacturer, and we believe that currently, IKCO has reached a level of maturity and quality to be able to compete. With the removal of restrictions in the domestic and foreign markets, IKCO can compete with cars that enter the country.”
Khatibi announced that Iran Khodro has no plans to import cars at least until the end of the year, but its subsidiary companies will be importing cars.
In an interview with Donyaye Khordo, Al-Havirdi Dehqani, a member of the Majlis Industries and Mines Commission, said the sale of domestic cars through IME has increased their final price.
“MPs are against any circular that increases the prices of vehicles. One of the ways that the government has tried to control the market this year is the supply of mass-produced products of domestic automakers through IME, which has caused an imbalance in the market … This is while we could manage the market by increasing the production and supply of products,” he added.
Commenting on whether brokers have been eliminated by selling domestic vehicles through IME, the legislator stressed that the Majlis is against any means that increase the prices of cars.
“The listing of cars on IME has raised prices and created rent for the manufacturer and seller, since any applicant who offers the highest price in IME gets the car,” Dehqani said.
“One of the main problems of the car industry is the mismatch between supply and demand. The demand for cars has reached more than 2 million units per year while car manufacturers claim that if they receive full support, their production will only reach 1.4 million units per year.”
Imported Vehicles Will Not Belong to ‘Economy’ Class
Economy cars are a priority for imports, but in case costlier cars are imported, they will be subjected to the luxury car tax, the Ministry of Industries, Mines and Agriculture has announced.
However, given the fact that the final price of imported cars will be 120-140% higher than the initial price and they will be subjected to the luxury car tax, it becomes obvious that none of the imported cars would be considered an economy car.
In an interview with Donyaye Khodro, Morteza Afqeh, an economic analyst, said as per import regulations, the import of cars with a maximum price of €20,000 are permitted, although those priced under €10,000 are considered economy cars and enjoy import priority.
“It will be Iran Mercantile Exchange’s responsibility to set the prices of imported cars,” he added.
Asked about the profit margin of these cars, the analyst said, “According to the directives of the Industries Ministry, imported cars will enter IME with a 15% profit added to the final price. Therefore, the base price of imported vehicles can be estimated. Of course, other costs such as tariffs, car scrap and logistic fees will also be added. With these costs, about 120-140% will be added to the final price.”
Commenting on the final price of imported vehicles costing less than €10,000, Afqeh said, “A car valued at €10,000 at the Nima rate of each euro priced at 296,290 rials will amount to 2.92 billion rials [$7,845]. Now, if we consider the average final price to be 130% higher, it will reach 6.81 billion rials [$18,296]. By taking into account the 15% commercial profit, the car’s price in IME will be approximately 7.83 billion [$21,037].”
Calculating the final price of imported vehicles worth €20,000 in IME, the analyst said, “According to the price limit set for car imports, a €20,000 vehicle based on the Nima foreign exchange rate will be priced at 5.92 billion rials [$15,905] and the total price, including insurance costs, freight, customs duties, etc., will amount to 13.62 billion rials [$36,693]. Therefore, this car will probably go to IME with a base price of 15.67 billion rials [$42,101] and the profit determined for this car will be 2.35 billion rials [$6,313].”
Afqeh noted that the impact of car imports will become evident when these products are released in the domestic market.
“The expectations of buyers who have the financial ability to purchase products worth more than 15 billion rials [$40,300] should be checked, because these cars will not be included in the economy car category,” he said.
