Iran Car Sales Slump Despite Loans

Iran Car Sales Slump Despite Loans
Iran Car Sales Slump Despite Loans

Despite the recent auto loan facility offered by carmakers with the help of the Central Bank of Iran and President Hassan Rouhani's administration, sales of locally produced cars have dropped off a cliff, according to a new report released by a local automotive authority.

The report published by the Iranian Automobile Manufacturers Association indicates that in spite of the best efforts by the powers that be, production has fallen 42% compared with the previous year's sales.

This summer, the Iranian automotive industry was faced with an acute lack of demand following a prolonged public boycott campaign called "No to Local Cars" because of their high prices and poor quality.

That prompted the government-backed program that extended auto loans of up to 250 million rials, which reportedly boosted sales for a short period and led to the sale of 110,000 cars within six days. However, as predicted, the increase in sales was only a band-aid to hemorrhaging problem.

Although it changed the course of sales for spreadsheets, it did not fix the major problem of lack of viable credit.

The report suggests that in the long run, other major issues need to be looked at and that the loan may need to be revived in some form for carmakers to leave the quagmire they are in.

Without the prospect of a loan, potential car buyers in Iran are holding out for newer and cheaper models, and refuse to buy the cars currently on offer as they have been in production for the better part of 25 years.

Recent news of Fiat and other European carmakers in talks with national automakers seems to have persuaded car buyers to hold out for a better option, as one recently told Financial Tribune, "Something which isn't another Pride or Peugeot."

Fiat is rumored to be keen on setting up operations in Iran.

The news of a joint venture with Fiat was again in the spotlight when some 370 Italian traders, including representatives of steel group Danieli, energy company Enel, agricultural machinery maker CNH Industrial, Telecom Italia and several banks, recently visited Iran to discuss business opportunities. This is while Fiat was conspicuous by its absence at the event.

The tepid reception to talks with Peugeot, which according to some well-connected sources has already signed agreements with Iran Khodro, is due to the fact that they have lined up some old models that are well beyond the price range offered in other markets.

This has dampened any expectation of an enthusiastic reception toward the French car producer's upcoming reentry.