Iranian Cars: No End to Low Quality, High Prices

Iranian Cars: No End to  Low Quality, High Prices
Iranian Cars: No End to  Low Quality, High Prices

An online campaign started by Iranians to not buy domestic cars has gathered momentum this week, as a leading price expert also hit out at car overpricing.

The campaign has gained momentum, as consumers are bitter about the Iranian carmakers' constant greed for raising the prices of their low-quality vehicles.

Despite this campaign, Iran's second largest carmaker had the cheek to seek a rise in the price of Saipa's Pride—which is currently sold for 200 million rials ($6,000 at market exchange rate)—by an extra 10 million rials ($3,000), the parliamentary supervisor in the Competition Council said.

"Since the finished price of the car is no more than 50 million rials, the council has refused to let the auto manufacturer go ahead with the price hike," Nader Ghazipour was quoted as saying by IRNA.

  Overpriced, Atrocious

Saipa—Iran's second largest auto manufacturer and semi-state-owned company—has for several years been producing the Pride, which has been overtaken by Chinese brands as the cheapest available in the domestic market.

The Kia Pride, originally developed in Japan 20 years ago for Ford under the Mazda brand, is now sold in Iran under a selection of names, including Saipa 131, 132 and 141 with each model differing slightly from the other.

Iran's Standards and Quality Inspection Company released an assessment report for the Iranian month ending May 21, which indicated that Pride was the worst in terms of quality among 28 locally manufactured vehicles.

Saipa's marketing and sales deputy, Reza Naqizadeh, recently announced that the company intends to reduce the production of Pride.

The long-term plan, he said, is to replace the vehicle with two other Saipa models—Tiba and Saina—neither of which are cheaper than the Pride.

Ghazipour added that iron and steel sheet prices have dropped, therefore, carmakers should reduce their prices.

The problem is that local auto manufacturers have been able to continue to fleece customers because of high import tariffs and absence of better domestic options. That is why, they have been acting as they wish and no organization has been able to stop them.

"Local carmakers have been using substandard Malaysian and Chinese auto parts in their vehicles," he said, noting that the parliament strictly opposes any hike in prices of locally manufactured vehicles.

"Only under one condition might the parliament agree to a rise in prices and that is if the companies produce new models with higher quality."  

The parliamentary supervisor claimed that if local auto-manufacturers were to produce high-quality vehicles using the latest technologies at a price of 10 billion rials ($2 million), the parliament can lend support, however, "our priorities lie elsewhere".

According to the MP, "Every average Iranian should be able to purchase a vehicle after two years of saving and that is the goal we should move towards."

The possibility of achieving this goal, however, is far-fetched as an average middle class Iranian, at best, earns 15 million rials a month (less than $500).

After deducting basic expenses, if a person were to set aside even one-fourth of the salary, they will need to save for at least four years to be able to purchase a Pride.

  Structural Issues

The problem of price fixing is not only confined to Saipa, other major manufacturers like IKCO, the country's premier carmaker, have also come under heavy criticism for pricing their vehicles much higher than their real value.

The overpricing of domestic cars may be s symptom of a wider structural problem in the automakers' financial accounting. During the holy month of Ramadan, Saipa publicly stated they were no longer offering staff the post-fasting Iftar meal as a cost-cutting measure.  Local auto part producers have also criticized the large manufacturers, primarily Saipa, for not paying their dues over the past several fiscal quarters.

Secretary of the Iran Vehicle Manufacturers Association recently rejected the allegation that they are in heavy debt to auto part makers, saying the claim is "baseless".

Ahmad Nematbakhsh slammed the claim of Mohammad Baqer Rejal, chairman of the board of directors at Iran's Auto Part Makers Guild, arguing that the debt "is not that much".

Addressing the 11th International Exhibition of Auto Parts held earlier this week in Isfahan, Rejal said data indicate carmakers are in debt to auto part makers to the tune of 45 trillion rials ($1.3 billion at free market exchange rate).

Iranians don't care who is indebted to whom, as long as the burden is not passed on to car buyers. Following years of apathy shown by carmakers, Iranians have launched an online campaign to boycott domestic cars until their prices decline drastically.