Auto Prices Shrouded in Uncertainty

Auto Prices Shrouded in UncertaintyAuto Prices Shrouded in Uncertainty

Members of the Competition Council (CC) met on Saturday to discuss the hotly debated issue of raising car prices.

The Central Bank of Iran and Iran's Standard and Quality Inspection Company had provided the needed data on car price inflation and vehicle productivity, IRNA reported this week.

"The data provided were thoroughly assessed during the session," said Issa Emami, member of the CC, adding that manufactured vehicles are of poor quality and do not meet the productivity standards. Members of the council have now announced that prices will not increase more than an average of three percent.

Earlier, Saipa Automotive Group’s CEO Saeed Madani said his company would  increase prices by 15 percent. Early in April, Iran Khodro (IKCO) also submitted a new price list to the CC. Prices had risen compared to the previous year and the company's CEO Hashem Yekehzare defended the hike in prices on the grounds that "manufacturing costs had increased compared to the year before."

"Prices might rise by maximum five percent for Saipa and two percent for IKCO," Emami noted.

  Quagmire of Indecision

While suggesting that the government should be the body responsible for setting prices in "monopolized markets," lawmakers proposed a new amendment in February that has only complicated matters further.

Although for now it is not entirely clear what this entails, members of the CC have implied that "the council might not continue to shoulder the responsibility of setting car prices."

The issue is currently being investigated by the National Competitions Center and the responsibility is likely to be given to the administration's Economic Council.

Over the past two years, however, the ministry of industry, mine, and trade had dispatched two separate letters to the Economic Council urging them to liberalize the auto industry. Neither letter has yet been responded to.

Three years ago, before the CC took over auto price fixing, car prices were set by the vehicle committee of the Organization for Protection of Consumers and Producers Rights (OPCPR, affiliated with the ministry of industry).

Deputy Minister of Industry Mohsen Salehinia has said if the auto industry monopoly ends, the CC's formulas for devising auto prices will no longer be valid.  While it is common knowledge that Iran's auto industry is duopolized by IKCO and Saipa, the official has suggested that the OPCPR may have to take over car pricing once more.  

The parliament's decision has now obscured matters pertaining to vehicle pricing controls, Reza Shiva, head of the CC, said, as reported by ISNA, while implicitly suggesting that "the matter might no longer fall under the responsibilities of the council."

Nonetheless, Nader Ghazipour, the parliamentary supervisor of the CC, has affirmed that "the council will continue to be the regulator of vehicle prices until further notice."   

On the other hand, member of the parliament's industry committee Behrooz Nemati said that the CC has submitted a letter to the parliament so that the matter can be clarified. The economic and industry committees will investigate the issue, Tasnim News Agency quoted him as saying.  

While most other officials were evasive in comments, Nemati said that fixing prices by the CC had been "a mistake to begin with" as mandatory price fixation disrupts the market. Instead, he suggested that "pricing schemes need to be formulated based on supply and demand."

The only thing that seems to be certain for now is that the issue is at best highly ambiguous. It will now be for the parliament to shed extra light on the matter.