Auto Production Overhaul Imperative

Auto Production Overhaul ImperativeAuto Production Overhaul Imperative

Given the current state of Iran's economy, the auto industry may fall back into recession if carmakers fail to implement major changes, a former CEO of Iran Khodro Company said.  

Davood Mirkhani Rashti referred to auto loans as a temporary fix while stressing that automakers need to overhaul their production structure, Eghtesad News reported.

The auto loan scheme was part of the incentive package launched by the government to stimulate the flagging domestic industries, among which the half a century old car industry was hit hardest due to a host of reasons, including mismanagement, high prices and low quality. The loan, which was supposed to be offered over a period of six months, lasted only six days and 110,000 vehicles were sold, leaving auto pundits and executives aghast at the speed of registrations.

Mirkhani stressed that after having logged sales, car manufacturers must focus on improving quality, expanding their range of products and stop producing models introduced 30 years ago, namely Peugeot 405, Peugeot Pars and Kia Pride family of vehicles.   According to Mirkhani, Iran's leading carmakers have planned to produce 1,500,000 vehicles this year.

"But in view of the fact that the market is saturated, they should put off these production plans, take the results of the studies carried out at their strategic centers into account and reduce that number to 800,000," so as to not obliterate secondhand car prices.  

"Iran's leading carmakers had tens of thousands of cars piling up in their parking lots and managed to sell them off with the new loans. With the new sales, the carmakers will be able to partially pay their debts to auto part manufacturers," he said.

  The Employment Issue

"There are laborers working in two shifts at both IKCO and SAIPA, each shift lasting eight hours." he said.

"Due to the prevailing conditions, the companies cannot lay them off nor can they pay them unemployment insurance. Therefore they have no choice but to pay their wages in whatever way possible, and this issue [which is highly costly] is unfortunately all that the managers have come to care about."  

The Iranian automotive industry is the second largest sector in the Islamic Republic after the oil, gas and petrochemical sectors.

The automotive sector employs in excess of 700,000, according to some estimates and, by taking into account subsidiaries, this number rises to one million employees.  In recent years, the carmakers attempted to cut down on costs in their factories, with reports around the advent of Iranian New Year (March) stating that some large manufacturers were cutting end-of-year bonuses and other perks.