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Automotive Myopia: Is There a Cure?

Automotive Myopia:  Is There a Cure?Automotive Myopia:  Is There a Cure?

Auto manufacturers have every right to increase car prices, as the cost of raw materials has increased, secretary of Iran Vehicle Manufacturers Association declared.

Ahmad Nematbakhsh added that the Competition Council has been putting off a decision while auto manufacturers had sought an increase in vehicle prices at the beginning of the current Iranian year (March 21).

Speaking to Eghtesad News, the official noted that the online campaign against domestic cars and the surrounding hullabaloo will not put things off course.

"The campaign has not had a big effect on auto sales," he said.

Following the grassroots campaign "No to local cars" due to their poor quality and high prices, which has intensified over the past few months, automotive officials have adopted contradictory stances.

While some officials like Nematbakhsh stress that it has not affected the sector and Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh branded supporters of the campaign as "traitors", others admitted that sales have slumped.

Taqi Mehri, the head of Traffic Police Department, said car registrations have declined by 15% in the first five months of the current Iranian year (ending Aug. 22) compared to last year.

According to Nematbakhsh, one of the reasons for the Competition Council's refusal to take a decision regarding auto prices is that the tenure of the current members has come to an end and the request to raise prices is undergoing technical inspection.  

"Five months have passed since the automakers submitted documents proving that car prices must increase. But a final decision has not yet been made by the Competition Council and we are waiting for the announcement of new and increased prices," he said.

"There is no logical justification for refusing to increase vehicle prices, as the cost of goods automakers must purchase from related industries has gone up. Prices in most other industries increase every three, six or nine months, but the same is being refused for the auto industry."

The official reminded that the council has repeatedly requested that the Management and Planning Organization liberalize auto prices, but the requests have been ignored.

"Automakers cannot put up with this situation much longer. The only viable solution to improve vehicle quality is for the government to not interfere in setting vehicle prices or to increase prices based on the Competition Council's formula," he said.   

Nematbakhsh absolved car manufacturers of all responsibility over the poor quality of domestic vehicles by blaming it on western-imposed sanctions on Iran over its nuclear energy program.

"As we could not obtain auto parts from the French or other European auto companies during that period, we were left with no choice but to turn to other countries," he said. He added that auto part manufacturers have also been struggling with similar problems.

"In order to resume manufacturing with the same prices, auto part manufacturers have no choice but to use low-quality and cheap raw materials, which reduces quality of parts and, by extension, the quality of vehicles," he said.

The official argued that the Iranian currency rial lost 10% of its value against the US dollar in the current year, "which means that the end price of vehicles has also increased."

Nematbakhsh further explained that to support the steel industry, the Ministry of Industries, Mining and Trade increased import tariffs on steel alloys and steel sheets from 4% and 6% to 10% and 15% respectively.

"The prices of steel alloys produced locally have also increased as have the prices of energy carriers. What's more is that in line with the policies of the government, auto manufacturers had to increase the wages of factory workers. In the face of these facts, auto manufacturers have no choice but to increase auto prices," he said.

Luckily, the official did not mention the rise in gasoline, food and gold prices to justify the need to raise car prices.

Nevertheless, a quick glance at automotive developments in the Iranian print media and websites shows an eruption of long suppressed public grievances against automotive officials.

People are furious over the periodic rise in car prices and the decline in quality. They are adamant about continuing the campaign to boycott the purchase of local cars, as long as prices are not reduced drastically.

The failure to acknowledge this public outcry reveals that automotive officials are suffering from managerial myopia. The sooner the government makes an effort to cure it, the better. 

Financialtribune.com