US sanctions and economic headwinds have taken a toll on Iran’s auto industries with local car companies reporting 15.1% decline in output. In an offhand response to business insiders’ warnings and requests, the new Industries Minister Reza Rahmani says automakers need to focus on domestic potential.
“There are several models with 90% locally-made parts. Cars companies indeed need to focus on production of such models,” Tasnim news agency quoted the minister as saying.
Iranian firms produce a wide range of vehicles from models like Pride and Samand, which have been churned out for decades. Then there are cars made from completely knocked-down (CKD) kits, largely from China.
According to Iran Auto Industries Association, imported spare parts have a major share in the production of most models except Pride and Tiba – two low-priced and low-quality cars made by SAIPA, along with Samand and Peugeot 405 made by Iran Khodro.
The association claims “about 90% of the parts used in the four models are made by local manufacturers.”
After Iran signed the nuclear deal in 2015, local automotive companies forged close ties with French and South Korean companies, including Renault, Peugeot, Citroen, and Hyundai and announced plans to build and assemble new models for the growing auto market.
The deals renewed hope among Iranians that they will soon be able to get rid of old and outdated models like the Pride and purchase new fuel-efficient and safer cars
Dashing the hopes of average Iranians, the minister says domestic carmakers need to get back to the production of the same old models that have long been under a big question mark and fail safety and environmental tests
SAIPA says it has sold over 7 million Prides since production started a quarter century ago in 1993 (in those times the quality of the small family car was much higher). Pride is based on a Kia Motor’s hatchback from the 1980s. The South Korean firm halted production of the car in 2000.
Iran Khodro has been producing the Peugeot 405 apparently for ever since 1992! The model has a 39% share of the company’s total output. In addition to Iran, currently, the vehicle is made only in Egypt. The French company halted production of the model in the EU in 1997.
Samand is IKCO’s homegrown sedan designed in 2003, and Tiba is a small city car made by SAIPA which is a mishmash of the Chinese hatchback Chery QQ6 and Pride.
All four cars are notorious when it comes mileage, flaunting safety rules and spewing toxic pollutants into the air.
Higher Prices Coming
Rahmani pointed out that new car prices will be announced soon. He did not provide a timeline.
“It has been decided that the Market Regulatory Authority be in charge of setting car prices.”
Mohsen Salehinia, a deputy minister of industries, earlier told Fars news agency, “Car prices will certainly be revised (upward). New prices are being discussed at the Consumer and Producer Protection Organization (CPPO).”
After studying economic parameters related to the auto industry, the CPPO will submit a report to another state body, the Market Regulatory Authority, an ad hoc committee created to keep checks on inflation and price gauging.
Prior to this, another state body, the Competition Council was in charge of supervising the prices of a group of domestic products, including cars. It used to set prices for some goods including cars costing 450 million rials ($3,214) or less.
Informed industry sources argue that factory prices of vehicles have still not been raised despite with the steep (almost 400%) increase in foreign exchange rates over the past eight months.
Domestic car companies rely on imports of some key parts. The firms claim they are under mounting pressure due to the higher currency rates and stringent government controls that bar them from increasing prices.
Since the beginning of the current fiscal in March, the national currency has lost more than 70% of its value against all major currencies. On Wednesday, the greenback was traded at 132,000 rials in the gray market.
In recent months and following the reimposition of US sanctions, Iran’s auto sector has been hit hard. In the first half of the year, car companies reported a 15.1% year-on-year decline in production. The key industry’s total output fell to 582,747 cars and commercial vehicles from 686,687 units one year earlier.
Production at the largest auto companies, Iran Khodro, and SAIPA fell by 23.1% and 10.7% respectively compared to last year and reached 251,964 and 254,982 units.
Industries and traders of all stripes have complained for months that it is almost impossible to function in the prevailing unstable and deeply chaotic forex market. But their appeals and cries for help to save jobs and endure have obviously fallen on deaf ears.
Now officialdom is telling the people that the situation will not change for the better anytime soon and the people should make do with the clunky cars IKCO and SAIPA have been producing for decades with seemingly complete disregard for consumer rights.
