Nematzadeh Defends Automotive Sector

Auto & Tech Desk
Nematzadeh Defends Automotive Sector
Nematzadeh Defends Automotive Sector

As the possibility of new vehicle brands coming to Iran looms on the horizon, potential buyers have been refusing to purchase locally manufactured vehicles.

Low quality and high prices have for some time been the top two complaints in regards with local cars. With high hopes for the post-sanctions era, buyers are waiting for the arrival of European brands.

Customers look forward to a more competitive automotive environment and wish to pay less for better quality cars, for which reason Iranians have joined a campaign themed "No to Iranian Cars".

The campaign, which began as a grassroots movement, has been criticized by many officials.

Earlier this week, Hashem Yekezare, CEO of Iran Khodro Company—the country's largest auto manufacturer—declared that the campaign is politically supported by malevolent parties, Eghtesad News reported.  

In a recent press conference, Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh stated the campaign will hurt the industry and the closing down of a manufacturing unit will only result in people losing their jobs.

According to the minister, $2.2 billion were spent on the import of 106,000 foreign vehicles last year, while only $1.9 billion were spent on the local production of 1.2 million units.

"The government is proud to have reduced vehicle imports and increased local production," he said, stressing that supporting the local car manufacturing sector will prevent foreign exchange from exiting the country.

Nematzadeh stressed that none of the relevant organizations, including the ministry, automakers and the Competition Council—the body responsible for setting vehicle prices—has announced that car prices will decline.

"An increase in auto prices is inevitable because the company's books show that production expenses have increased. However, we have been putting this off because of the persisting complicated situation," he said.

The minister explained that auto prices were not increased last year, "which can be interpreted as a decline in auto prices, while automakers have been told to reduce expenses and increase efficiency".

"People have come to believe that the nuclear deal will lead to a drop in prices while the truth of the matter is that the only major change will be that banking expenses will reduce and prices of imports will reduce. However, the same cannot be said about the locally produced vehicles," he said.

Asked about the ministry's plans for helping the auto industry exit the current stagnation, Nematzadeh ignored the question and said, "Local automakers and auto part manufacturers are not facing any serious problems. Last year, vehicle production increased and so did exports."

The fact that 80,000 vehicles having been lined up in the parking lots of vehicle manufacturing companies is not very odd, since this does not necessarily indicate that the industry is declining.

"When the Hassan Rouhani government first took over the administration of the country, the same number was three times as much as it is now," he said.

Nematzadeh explained that nearly 5,000 vehicles are produced daily.

"Since it takes nearly two weeks from the day the vehicle is produced before it gets a number plate, there will always be a certain number of vehicles parked in the company's parking lots," he said.

The minister was also questioned on the rumors of allocating loans to the country's biggest carmakers, IKCO and Saipa.

Earlier this week, a member of Majlis Industries Commission, Hamidreza Fouladvand, said the two companies will receive bank loans to the tune of $1 billion to help alleviate their financial troubles.

Yekezare, Nematzadeh and members of two parliamentary commissions—industries and economic— met last week to discuss the latest automotive developments, Fars News Agency reported at the time. Nematzadeh denied the rumors and said "such a matter was not even discussed in the meeting".

The minister also urged banks to increase the ceiling on car loans.

It has been a month since all banks have been notified of a new enactment passed by the Central Bank of Iran to increase auto loan ceilings from the previous 70 million rials ($2,000 at market exchange rate) to 150 million rials ($4,400).

This is expected to motivate Iranians to buy the poor quality and overpriced domestic cars.