Vehicle production has exceeded 1 million units for the first time in four years, as 1.2 million vehicles were produced from the beginning of the current fiscal year (March 21, 2022), the head of the Ministry of Industries, Mining and Trade’s Automotive Industry Office announced on Feb. 25.
“After the reinstatement of international sanctions in the fiscal 2017-18, there was a significant fall in vehicle production and the production of incomplete cars started. Until last year, our vehicle production never exceeded 800,000. In the current fiscal year, it has reached about 1.2 million vehicles, which indicate a noticeable increase,” Abdollah Tavakkoli Lahijani was also quoted as saying by IRNA.
Announcing that the production and supply of cars have been restored, the official said, “Currently, there are no restrictions or problems in the domestic car industry, as in the last weeks of the current Iranian year [ending March 20, 2023], we are witnessing a high supply of cars.”
Tavakkoli explained that the car manufacturer announces the car delivery time to the customer based on its stable production flow and if the customer wishes, the car’s registration process can be finalized based on the announced delivery time.
“The domestic car market will become competitive in the next Iranian year. With the mass supply of domestic cars to the market, which has coincided with the promised car imports, Iran’s car market is expected to become more competitive in the next fiscal year. In this competitive market, car manufacturers and importers may use various sales methods, such as leasing, to sell their vehicles,” he said.
Tavakkoli noted that the Industries Ministry has set the production target for next year at 1.8 million units, which “challenging target” can be fully achieved by relying on knowledge-based companies and domestic supply chain.
Iran’s car manufacturers produced 1.12 million vehicles in the first 11 months of the current fiscal year (March 21, 2022-Feb. 19), registering a 25% growth compared with last year’s corresponding period.
The monthly car production record was broken in the 11th month of the current fiscal year (Jan. 21-Feb. 19) with the production of 131,000 cars for the first time in five years.
Rising Car Prices Blamed on Higher Cost of Raw Materials
Higher raw material cost is the main reason behind the rising domestic car prices, according to a member of the Board of Directors of the Iran Auto Parts Manufacturers Association.
“Car prices are influenced by numerous factors, including economic conditions and liquidity situation, which are beyond the control of car manufacturers and parts producers. But the 60% increase in the prices of raw materials, such as steel, aluminum, copper and petrochemical products, last year is the main reason behind the increase in the factory prices of domestic vehicles,” Maziar Beiglou was also quoted as saying by Khabar Khodro.
“In addition to this increase, the growth of overhead costs due to electricity and gas outages in parts production units has reduced production and increased the costs of component manufacturers, because calculating the overtime pay of workers increases the overhead cost of each component,” he added.
Commenting on the effect of the skyrocketing foreign exchange rates on the prices of vehicles and parts, the official said, “Considering the high level of self-sufficiency, the rise in foreign exchange rate will not have a direct effect on the prices of raw materials [and on auto parts and cars] and won’t increase prices by more than 20%. But the 60% increase in raw material cost had a direct impact on the prices of components and cars.”
Beiglou noted that importing raw materials such as steel sheets from Russia is cheaper for component manufacturers than procuring them from domestic companies.
Referring to other problems, the official said parts producers sometimes face challenges in procuring raw materials from the commodity stock exchange when their supply stops.
“However, currently, the most important challenge regarding raw materials is their prices, the growth of which has destroyed the effect of price correction this year,” he said.
“Domestic parts manufacturers have the equipment, machinery, resources and manpower to produce parts for 2.2 million vehicles annually, but this volume of production requires liquidity and overcoming supply network challenges. Therefore, under the current circumstances of raw material supply and liquidity, it is not possible to achieve this production capacity.”
