The factory prices of cars produced by major domestic automakers Iran Khodro and SAIPA have increased by 29% on average, according to the CEO of SAIPA Automotive Group.
“A price increase for domestic cars was last announced in the ninth month of the fiscal 2021-22 [Nov. 22-Dec. 21, 2021],” Mohammad Ali Teymouri was also quoted as saying by IRNA.
“The National Competition Council and the Consumers and Producers Protection Organization determine the prices of cars, which process was launched about five months before the beginning of the current fiscal year [March 21],” he added.
The SAIPA chief noted that the two organizations based the new price changes on the first six-month audit reports of Iran Khodro and SAIPA.
“While the average price hike is 29%, the prices of some products such as SAIPA’s Shahin and QUIK [with automatic transmission] only increased by 18% and 17%, respectively. The price increase of Iran Khodro’s Samand, The prices of all domestic cars considered non-competitive by the National Competition Council have increased, which could be seen on the websites of the two domestic automakers.
“A car like Shahin, which has a factory price of 3.04 billion rials [$5,960] and taxes worth 400 million rials ($784), was sold for 3.44 billion rials [$6,744] by the company. Now it faces an 18% increase, or over 540 million rials [$1,058] in the factory price. This still shows a significant gap compared to the market price of about 6.7 billion rials [$13,135],” he said.
According to contracts concluded between the car manufacturers and customers, the delivery of cars will be based on the new factory prices.
Teymouri pointed out that the average price increase initially suggested by the council was more than 40%, but after the intervention of First Vice President Mohammad Mokhber, the rate was revised.
“With the new prices of domestic cars, we hope to achieve a good production this year. We have currently achieved 32% growth in production compared to last year,” he said.
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.
He explained that parts producers also face challenges in procuring raw materials from the commodity stock market 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 meet this production target.”