With online platforms being barred from listing vehicle prices and extensive disruptions in the supply chain, the Iranian car market slid further into a murky state of disorder.
It has been a month since Iranian e-commerce websites were barred from listing car prices. Following the ban, dealers have started using social media platforms like Instagram and Telegram for advertising their wares.
In separate talks with the Financial Tribune, Information Technology Organization of Iran’s deputy for legal affairs, Mohammad Jafar Nanakar, the head of E-Commerce Union, Reza Olfatnasab, and CEO of e-commerce firm Sheypoor, Reza Arbabian, discussed the decision to ban online car price listing.
Ironically, no state entity officially announced the ban that is believed to have been implemented by the judiciary with the Industries Ministry’s tacit approval and the ICT Ministry’s explicit disapproval.
Misconceived Policy
Censuring the ban as misconceived, Nanakar said, “State players should never implement measures that curb legal market transactions and push players underground.”
He emphasizes that imposing draconian laws and regulations lead to the creation of gray markets that authorities have close to zero oversight on.
“This is while by setting agile protocols and standardizing transactions, authorities can regulate markets and crack down on price gouging,” he added.
Over the past few months, the production rate of vehicles has nosedived in Iran. The supply chain disruption caused turmoil in the car market where racketeers roam freely.
In a move described by observers as sweeping problems under the carpet, state authorities accused online marketplaces—like Divar and Sheypoor—of being “dealers’ lair” before barring them from listing car prices.
Without mincing words, the legal expert says, “Solutions implemented by state agencies for regulating markets are outdated. In the age of the Internet and cyberspace, the business world has undergone profound changes. Therefore, legal frameworks and mechanisms must be reshaped to suit the needs of the current times.”
Nanakar noted that these startups have only set up platforms that ease business for other market players.
“By introducing safeguards and monitoring mechanisms, as well as setting up license agreements and protocols, these startups can help the authorities manage the market. However, no one should expect them to act in place of market regulatory bodies,” he said.
“You should keep in mind that implementing Know Your Customer solutions is a must for online platforms that offer sales services.”
KYC solutions are processes through which firms identify their customers and assess their credibility.
The ICT Ministry has launched a KYC system dubbed Shahkar. If the system delivers satisfactory results after test runs, all e-commerce firms will be obliged to employ the system for screening the identity of their users.
While acknowledging the efficiency of an open market approach, Nanakar said, “When corporations manipulate markets to double their gains, state intervention is inevitable.”
Making a Mountain Out of a Molehill
While startups and the E-Commerce Union have often announced their readiness to help authorities supervise the market, they criticize the latest hodgepodge of government policies for being ineffective.
The union’s secretary says, “When operations of well-known startups are disrupted, people will turn to outlets that authorities are simply unable to monitor. That’s exactly what happened after car price listing on e-commerce platforms was prohibited.”
According to Olfatnasab, as soon as the ban was imposed, Telegram channels and Instagram pages sprang up like mushrooms to list car prices.
Despite being blocked in Iran, with close to 40 million users, Telegram is the most popular social media platform in the country, closely followed by Instagram.
The unionist points out that a stack of factors have led to auto sector upheavals. To name a few, he pointed to the sharp decline in carmakers’ output and the shortage of auto parts triggered by the reimposition of US sanctions against Tehran, which frayed ties between Iranian companies and their foreign partners.
He noted that Iran’s major automakers, Iran Khodro and SAIPA, have been accused of hoarding vehicles and operating hand in gloves with dealers for jacking up prices.
Olfatnasb said if the allegations were true, these would have further triggered a market chaos.
While acknowledging that dealers plying the cyberspace have added fuel to the raging prices, the unionist said the local media and some officials made a mountain out of a molehill.
He noted that startups are prepared to implement whatsoever mechanism authorities introduce, including the Shahkar system.
Reportedly, checking the identity of each user would cost about two cents through the system.
Olafatnasab said the services offered by the sales website are freemium—a business model wherein basic services are provided free of charge while more advanced features must be paid for.
According to him, startups cannot charge customers for checking their identity via Shahkar, “this would turn their business model upside down”.
He added that if the firms pay for the procedure, it would add to their overheads and slash their profits.
While reiterating the union’s commitment to collaborating with authorities, he called on the ICT Ministry to curb the costs.
Startups Most Valued Asset
Reza Arbabian, CEO of e-commerce firm Sheypoor, said, “The trust of customers is our most valuable asset. We have done everything in our power to build trust in our business.”
He stressed that Sheypoor has implemented a smart mechanism for monitoring users’ activity.
Whenever someone posts an advert on Sheypoor, a smart algorithm analyzes the ad. If the price is outstandingly higher than the market average, the advert will be suspended.
Arbabian said, “The decision to ban car price listing has made the business environment murky and pushed auto sales further into a gray zone.”
Referring to the hot topic of KYC solutions in Iran, the business owner said there have been talks with authorities over the implementation of a KYC system.
“The ICT Ministry’s Shahkar is riddled with bugs and flaws. The system’s margin of error is 40%, which would absolutely disrupt business,” he said.
The system monitors users’ identity by pairing their National ID number and mobile subscription credentials. Considering the system’s limitations, forging identities would be an easy task for cybercriminals.
Talks have been held by unionists, e-retailers and judicial authorities on how best to stabilize the online auto market. Setting a price range for each vehicle by the E-Commerce Union and Iran Auto Dealers Association is one of the proposals under consideration.
However, according to Arbabian, the auto dealers association only delivered the list once.
Market Status
After Washington reimposed harsh sanctions on Tehran, the Iranian economy went into a tailspin, the country’s national currency, rial, lost two-thirds of its value and prices of all goods went through the roof.
The rial’s depreciation made the general public rush to convert their savings into safe havens, including hard currencies, gold coins and even cars.
As the economy tanked, the car buying frenzy led to new hikes in prices. Currently, the cheapest vehicle in Iran’s auto market SAIPA’s pride costs 510 million rials ($3,800). The same vehicle would not have fetched 200 million rials ($1,500) a year earlier.
Add to these, the nosediving output of carmakers has widened the supply-demand gap. Data released by the Industries Ministry reveal that in the last fiscal year (ended March 20, 2019), 955,923 cars and commercial vehicles were produced in Iran, indicating a 37.8% year-on-year decline.
Unable to resolve fundamental economic issues facing Iran, state authorities cobbled together “policies and strategies” for calming the markets. Almost all of these measures only ended up as publicity stunts that secured airtime for politicians who never tire of being in the spotlight while chaos rules the market.
