Domestic spare parts manufacturers are facing production problems, as the supply chain of raw materials has run aground.
Spare parts producers have to import some of the vital raw materials since they cannot be supplied domestically, which has become problematic due to sanctions, forex rate fluctuations and poor currency allocation.
Navid Habibi, a spare parts manufacturer, told Khabar Khodro that companies importing raw materials and producing spare parts have been waiting for currency allocation for a long time.
“A large number of spare parts manufacturers stopped their production lines due to the lack of raw materials in the 12th month of the fiscal 2022-23 [Feb. 20-March 20], which will have its ramifications on the market in the next two to three months,” he said.
He mentioned that importers literally suffered “a stroke” due to the non-allocation of foreign currency and the sudden jump in forex rates.
“The spare parts market is going to face more challenges in the fiscal 2023-24 compared with the previous year due to the lack of spare parts, the surge in exchange rate triggered by inflation and the salary increase implemented in the Iranian New Year [started March 21],” he said.
The spare parts manufacturer stated that the implementation of the Product Identification Plan and the Taxpayer System Plan are among challenges facing auto spare parts market operators in the fiscal 2023-24.
“Surveys indicate that 75% of the auto spare parts industry players are not ready to implement these plans due to a lack of software infrastructure and technical knowhow,” he said.
Asked if the new vehicle production target will affect spare parts producers, he said the realization of the production target of 1.8 million cars in the current fiscal year (March 2023-24) will show its effect on the spare parts market in two to three years, and will boost spare parts production.
“This is because new cars need spare parts after two to three years,” he said.
Habibi noted that the imbalance between spare parts supply and demand fuels inflation from the demand side, which leads to a price rise, even if the exchange rate were to remain constant”
Brake-Pad Producers Cry Foul
Masoud Hassanpour, secretary of Iran's Brake-Pad and Clutch Manufacturers Association, discussed the same problems in the brake-pad market in an interview with Donyaye Khodro.
He stated that the main problems of brake-pad manufacturers pertain to import order registration for raw materials and currency allocation, which should be completed before undergoing the customs procedures.
“Many raw materials are either not available in the country, or do not meet the needs of producers. We are also having problems in procuring foreign exchange for imports,” he said.
"When the producer or the import company registers its order, it has to wait for the currency allocation, while there is no currency. According to the rules, the company has one month to furnish the currency after placing an order.”
Hassanpour noted that producers must block 5% of the import order value in their bank accounts.
“If one month passes and the manufacturer wants to extend it by one more month, it should block an additional 10% of the order’s value. This is while producers are facing a liquidity crisis and this 15% becomes considerable,” he said.
"Currently, we are seeing a big crisis in the manufacturing sector and I think it will show its impact in the next five or six months. The number of products in the market will decline due to disruption in the supply of raw materials."
According to the official, imported and smuggled brake pads meet 30-40% of domestic needs.
“While domestic production can meet the market demand for brake pads, imported and smuggled parts constitute 30-40% of the domestic market,” he said.
“Since the market is aflush with imported brake pads, there is no demand for the domestic product. As there is no incentive, production has declined and it is lower than the domestic capacity. About 60-70% of domestic products and 30-40% [20,000-30,000 tons] of imported and smuggled goods meet the 75,000-ton demand of the Iranian market.”
Hassanpour said the domestic brake-pad production capacity currently exceeds 100,000 tons.
ID Registration Plan Increases Auto Spare Parts Quality
The implementation of the plan for the mandatory registration of IDs for auto spare parts has eliminated most of the unlicensed producers and led to a 50% increase in the quality of spare parts.
The ID registration plan was also effective in increasing the competitiveness and liquidity of official spare parts manufacturers, according to the head of the Spare Parts Committee of the Association of Homogeneous Propulsion Industries and Component Manufacturers.
“Currently, [however,] of the 3,000 spare parts manufacturers, only 55 are selling products with a tracking code,” Ahmadreza Ranaei was also quoted as saying by Khabar Khodro.
“The implementation of the spare parts ID plan and tracking code has been effective in eliminating 80% of unlicensed producers from the domestic market,” he added.
Nevertheless, the official did not elaborate on the plan’s impact on smuggled automotive parts that earlier swarmed the domestic market.
Asked whether the plan has helped sustain the ban on the import of counterparts available in the domestic market, he said the import of matching parts has declined because of the tight foreign currency situation and not due to this plan.
“With the ID registration for spare parts and the removal of unlicensed producers, official manufacturers are no longer under pressure and can sell auto parts at a more convenient pace,” he said.
Ranaei noted that the plan has improved the quality of 55 spare parts by about 50%.
