After the government stopped the allocation of foreign currency for tire importers, the domestic market is facing numerous challenges in supplying tires, according to the secretary of the Iran Tire Importers Association.
“The lack of forex allocation for tire imports has caused shortages, an imbalance in supply and demand and an 80% increase in the price of heavy vehicle tires,” Mohammad Mir-Abedini was also quoted as saying by Khabar Khodro (a Persian website that covers automotive news).
He added that if this trend were to continue, the domestic market will face a crisis in supplying tires for heavy vehicles.
“There was a decline in the import of ring size 13 tires [also known as Pride tire] in the last Iranian year [ended March 20, 2023]. In view of the 32% tariff, 9% value-added tax and other costs of the official import of car tires, as well as the 50% price difference compared with smuggled tires, tire importers did not undertake the official import of car tires for the third consecutive year,” the official said.
According to Mir-Abedini, heavy tires were imported as per the procedures of previous years.
“Although the government had announced that the forex allocation for heavy tire imports will use the exchange rate of 285,000 rials for each dollar, the total allocation for tire imports in the last three months only amounted to $100 million,” he said.
The official noted that the Iran Tire Importers Association has corresponded with the authorities to allocate foreign currency at the Nima currency rate for tire imports, but there has been no response.
Nima is a secondary market developed by the Central Bank of Iran to be used as a venue where companies sell their export earnings at rates lower than the open market rate to importers.
Referring to the annual need for imported tires, Mir-Abedini said, “With regard to car tires, 30% or 7 million rings of the country's total demand are supplied by imports. The need for 70% or 2.5 million rings of heavy tires used for buses and trucks is met through imports. All of the mining vehicle tires are supplied through imports.”
Auto Battery Industry in a Quandary
The car battery market will face supply problems come summer when demand normally increases largely due to problems associated with shortages of raw material and supply chains, said the head of the Iran Society of Battery and Storage’s Board of Directors and CEO of Azar Battery Company.
"The market will face supply snags when demand for batteries peaks in the hot season. Needless to say, there is a huge deficit of raw materials in the domestic market that has undermined battery production,” Kazem Mortaz was also quoted as saying by the Persian automotive daily Donaye Khodro.
Regarding high battery demand and its impact on the market and consumers this year, Mortaz said, “Since last year, barely 200 tons of lead have been offered twice at the Iran Mercantile Exchange. Our raw materials are being exported and the battery industry is obviously getting hit. That said, manufacturers are simply not willing to supply enough batteries to the market in the coming weeks."
The official noted that lead, one of the main raw materials of lead-acid car batteries, is being exported to other countries and battery manufacturers have to buy it at a price higher than world prices. He added that other raw materials like petrochemicals and the likes are also facing similar situations.
Mortaz noted that lead producers are not supplying domestic battery manufacturers because they make bigger profits from export.
“This raw material is exported to South Korea at a price lower than international prices because producers know that normally it takes two months for the foreign currency to be transferred to Iran and during this period, forex rates keep climbing. Thus export is much more lucrative,” he said.
The currency market of Iran is chronically in turmoil, such that the national currency has considerably lost its value. One US dollar was bought at 300,000 rials last August, but it is currently sold for 540,000 rials and counting.
Referring to other bottlenecks in battery production, he revealed that local carmakers have not paid battery producers for the past 60 days, which is also problematic.
In the coming weeks, battery consumption and demand will peak in the summer and companies expect to receive their orders on time.
Last summer, there was a flood of complaints and criticisms against large battery companies. Businesses were frustrated with the suppliers because they either did not receive their orders on time, or did not receive them at all.
At present, battery sales are suspended and market observers claim that the manufacturers want to jack up prices as is often the case with most consumer goods.
If the past is anything to go by, when any key commodity disappears from the market, a majority of people believe it’s time for another price hike.
