Auto Price Setting: Pros and Cons

Auto Price Setting: Pros and ConsAuto Price Setting: Pros and Cons

The Competition Council's price-setting measures are an impediment to foreign direct investment in the automotive industry, the secretary of Iran's Auto Parts Manufacturers Association said.

"Iranians have had to grant concessions to foreign companies that agreed to invest in Iran," Arash Mohebbinejad added, noting that foreign firms would not invest in a country that has a "high risk" business environment, unless they get good returns.

He noted that "agreements made with western countries cannot be implemented and this is due to banking limitations", as opposed to those done with Eastern Europe and China, Tasnim News Agency reported.

Mohebbinejad added that negotiations with Germany, France and Spain have had positive results, though the Competition Council's pricing is a perilous issue and impedes FDI and joint venture.  

To address the issue, he said, Iranians must minimize investment risk.

"Foreign exchange rates are still on a dual pricing track that poses a major problem and must be unified," he said.

Recent Improvements

The Competition Council has started to take the first steps in addressing this problem.

Last week, the council declared that it will no longer be responsible for setting the prices of two cars, namely IKCO's Dena and Renault's Tondar 90 (L90 or Dacia Logan).

Reza Shiva, the head of the council, said critics of price-setting strategies believe car prices would decline, if the council is no longer responsible for setting them, ISNA reported.

Analysts believe high import tariffs should be eliminated before liberalizing all car prices, otherwise domestic producers would exploit their monopoly and raise car prices.

However, the prices of the two cars not tagged by the council are not expected to increase because of competition from a number of cars available in the same price range.

Currently, Dena and L90 are being sold for 434 million rials ($12,400) and 490 ($14,000) million rials respectively.