Iran’s commercial vehicle manufacturers could not utilize their full production capacity, while demand declined in the current fiscal year (ending March 20).
Statistics indicate that the Iranian market has 200,000 worn-out commercial vehicles and only a small number of customers intend to replace them with domestic vehicles.
“The domestic commercial vehicle market needs a large number of products, but the rising exchange rate and its adverse impact on domestic and imported products have caused customers to stop buying new vehicles,” Milad Khamoushian, an automotive expert, was quoted as saying by Donyaye Khodro.
“With the rise in foreign exchange rate, which has increased prices, the demand and sale of commercial vehicles have declined and the domestic market is experiencing a new recession.”
Stating that unlike passenger cars, commercial vehicles do not offer a leeway for brokers and profiteers, the expert said, “Although not many profiteers are active in the domestic commercial vehicle market and it is not possible for them to sell such vehicles at a higher price, the import of used commercial vehicles has made it possible for them to enter this market.”
However, Khamoushian noted that the arrival of used imported vehicles, which are sold at exorbitant prices, cannot meet the market demand.
“As some customers hope to buy European models at a good price, they have stopped buying domestic products. In fact, the used vehicles have reduced demand for domestic commercial vehicles,” he said.
“Due to the country's economic conditions, the production of commercial vehicles was expected to decline, but this year commercial vehicle manufacturers were more successful than expected.”
The Ministry of Industries, Mining and Trade has announced that the country's major commercial vehicle manufacturers, both in the private and public sectors, have managed to increase production this year, despite all the problems. It, however, did not release any production figure.
Khamoushian stressed that although the production of commercial vehicles has not yet reached the capacity of peak years, their current turnover indicates that domestic manufacturers could overcome sanctions and the prevailing economic problems.
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, buyers 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 that car imports will have for some customers is that they will have more options to choose from.
