The domestic auto parts market is grappling with a price hike worsened by the jump in foreign exchange rate against the rial and delays in clearing imported car components in the last days of the current Iranian year (ending March 20), according to the head of the Tehran Automobile and Machinery Spare Parts Dealers Union.
In an interview with Khabar Khodro, Ahmad Hosseini outlined the current domestic supply status and prices of auto parts.
The car component market thrives at this time of the year, because most people travel during the Norouz (the Iranian New Year) holidays.
“Regardless of the problems of parts clearance, we will not face many supply problems in the closing days of the year,” he said.
However, the official admitted that customs bureaucracies and the rise in currency prices are creating problems for the market.
Noting that prices will increase if the exchange rate continues to rise, Hosseini said, “The prices of imported parts and some domestic products that require imported raw materials depend on the foreign exchange rate, which has increased and caused a 20% jump in the prices of these products.”
The official lamented the slow customs clearance of imported parts, which has led to a shortage of imported parts.
“The problem with parts clearance has been caused by the regulation that has mandated all imported parts to carry an ID and tracking code,” he said.
He explained that the new codes cannot be tracked and if the codes of some parts are scanned, the system will show the information of other parts, which is due to the lack of a precise infrastructure in the comprehensive trade system.
When asked which group of parts has the highest market share, Hosseini said, “Most of the auto parts are supplied through imports, in addition to the raw materials of some manufacturers, therefore imported components have the lion’s share of the domestic market.”
Automotive Recession Explained
The domestic automotive market is experiencing one of the biggest recessions ever and a car expert lists the reasons behind it as well as the impact of car imports in the closing days of the current Iranian year (ending March 20).
Car dealers claim that the current recession is unprecedented which, surprisingly, followed the announcement of government plans to liberalize car import and supply economy cars.
According to Sajjad Hemmati, CEO of Arian Khodro Pars and an automotive expert, people have stopped buying cars and believe that car imports will cause prices to decline and that they could buy a good quality foreign vehicle at an affordable price, Donyaye Khodro reported.
“However, domestic car manufacturers have signed a contract with Chinese automakers which, in my opinion, will not bring about major changes in the market,” he added.
Commenting on market condition in the last two weeks of the current Iranian year, the expert noted that customers are still reluctant to buy and sell cars and the recessionary situation will probably continue until the last days of the year because the financial condition of people has not changed.
“In the past, demand used to increase in the last weeks of the year and the market would witness a relative prosperity. However, currently, the market requires an increase in the purchasing power of customers and a decline in car prices, both of which seems unlikely,” he said.
“Now that the government has announced its new approach toward car imports and a change in previous procedures, the market dynamism could change when the new cars arrive and price uncertainty ends.”
Nevertheless, Hemmati maintained that even imports will not reduce car prices in the domestic market.
“Undoubtedly, car prices will not decline and if they decline, it will be influenced by market conditions and won’t be significant. Most likely, car prices in the first months of the new Iranian year will more or less stabilize at the current high figures and buyers will have to go back to buying low-quality domestic cars and Chinese vehicles,” he added.
The expert believes that if the foreign exchange rate stabilizes in the current range, the sale of domestically assembled Chinese cars will resume.
Regarding new car imports, he said, “Fewer than 200 cars were purchased from the region and arrived at Iranian customs offices, which have not been cleared yet. This is despite the fact that [Mohammad Baqer] Qalibaf [the parliament speaker] had announced that they cannot say which cars from which companies will be sold in the market, but the applicants must have 5 billion rials [approximately $10,000] in their account as a deposit to buy these [unknown] cars. Such contracts cannot bring down the prices of domestic cars, but will only entrench recession in the market.”
Stressing that expectations of a quick price reduction after the entry of foreign cars are unreasonable, Hemmati said the only immediate effect is that car imports will offer more options to some customers.
