As if not to stay behind the unending race to jack up prices of goods and services in ways unseen in the recent history of the country, auto spare parts makers also have more than tripled their prices making maintenance and repair services unaffordable for many car owners.
For instance, each headlamp of the Japanese Mazda3 assembled by Bahman Motor sells for 90 million rials ($642) indicating a 200% increase. The price of batteries for SAIPA’s small city hatchback Pride has reached 3 million rials ($21) from $7 earlier in March.
Head of Tehran Auto Mechanics Association Alireza Nikaeen told state TV, “Prices of brake pads, clutch disks and filters have more than tripled.”
He says the market is flooded with low-quality fake spares imported from China. “The quality of parts made by local parts manufacturers has also declined because the import of acceptable quality of raw materials is facing immense problems.” Iranian parts makers depend on the imported raw material.
A spokesperson for the Auto Spare Parts Sellers Guild Mehdi Kazemi says, “The huge jump in currency rates has led to the high and rising prices of spare parts… Given the unprecedented fluctuations in the forex market, importers have suspended their activities while the output from local manufacturers has taken a big hit.”
Since March, the USD exchange rate has more than tripled and the national currency has lost more than 70% of its value. On Wednesday the greenback was traded at 140,000 rials in the gray market in Tehran.
Kazemi stressed the need for market regulation and complained that “Those in charge have not taken a single step in this direction…Since April, in several letters to the relevant authorities, the guild cautioned about the coming price hikes in the spare parts market. However, our calls and appeals fell in deaf ears.”
A chairman of the guild, Hassan Sade pointing to the galloping inflation says, “Prices have more than tripled in the spare parts market.”
He too is of the opinion that the significant rise in prices is due largely to the tanking of the rial and increase in overheads associated with imports of goods and raw material.
He censured officialdom for their persistent changes in rules and haphazard decision-making process that has been undermining normal business in Iran.
In recent months the government of President Hassan Rouhani has announced tens of currency policies with the aim of protecting forex reserves. Imports have been reduced like never before and tariffs are raised. However, failing to achieve the desired results and saddled with new problems like the sudden scarcity of intermediary goods, the administration has been forced to have a change of heart on a very regular basis creating more confusion and instability in its wake.
Sade further says that during the past fiscal that ended in March, $11.5 billion worth of spare parts were used for auto repairs and maintenance. Of this amount, 50% accounted for locally-made and imported spares through legal channels and the reset was smuggled.
>Gross Indifference
Secretary of Iran Auto Parts Manufacturers Association Maziar Beiglou says, “We have often cautioned authorities about problems auto parts makers face. However, the warnings have fallen on deaf ears and the situation has been worsening at terrible speed.”
Similar to other business insiders, Beiglou voiced serious concern and outlined a chaotic market saying that prices of raw materials have more than tripled since March. “Price of iron [ingots] used by parts makers have reached 30,000 rials (21 cents) a kilo from 10,000 rials (7 cents) six months ago.”
He adds that “due to the recent [economic] crisis more than 300 parts makers have been forced to shut down their business.”
Beiglou pointed to the monopoly of semi-state owned carmakers, Iran Khodro and SAIPA, over the domestic auto industry. “[Major] parts makers have contracts with local automakers that legally bar them from selling spare parts in the market. As per the contracts, parts makers are obliged to deliver their entire output to the carmakers.”
Due to these contracts, parts makers cannot independently offer their products in the market or forge ties with IKCO and SAIPA’s rivals from the private sector. Independent observers are of the opinion that the ironclad monopoly has added fuel to the raging inflation by limiting supply in the market.
One of the other issues that have hit the market hard is the fraud and greed of companies that have hoarded goods in the hope of making a fast buck.
The spokesman for the ‘Tazirat’ organization (a judiciary-affiliated ombudsman dealing with trading offenses) points to hoarding of raw material and auto parts.
Yaser Raigani described a case in Semnan Province, east of Tehran, where 500 billion rials ($3.6 million) worth of spare parts hoarded by a firm was discovered by law enforcement agents earlier this month.
Inflation, the greed of companies, poor decisions and the shortsightedness of policymakers have wreaked havoc in the auto and spare parts market. Nowadays visiting a car repair shop is akin to a nightmare. Costs of spare parts and the mechanic charges are simply outrageous.
