The Industries Ministry in a statement explained why it halted the sale of cars at the Iran Mercantile Exchange.
The ministry last week announced that selling autos via the IME was incompatible with the existing rules designed to regulate the auto market.
In the statement it pointed to the huge gap between supply and demand in the chaotic auto market, arguing that offering in-demand cars that are in short supply via the IME pushed up prices, Fars News Agency reported.
It also leads to the emergence of multiple prices for a particular car (hugely varying prices at the factory, the IME and the market), the statement added.
“So long as supply remains very low, it is highly likely that a third market will erupt wherein auto prices will jump higher than the factory and the IME.”
As per past rules cars that were not subject to pricing mechanism by the government could be offered at the IME. However, now the ministry claims it is in charge of regulating the price of all types of cars, including those that are exempt from pricing by the so-called Competition Council, a body in charge of setting prices of selected domestically-produced goods.
For the first time in its history, the IME hosted trade of 117 Kara cars in the last Iranian month that ended on May 21. Though insignificant in number, the move was seen as a sign of a broader plan to move all auto sales to the IME.
The suspension came just before the prescheduled offer of 430 cars last Wednesday, namely the Chinese brands Dignity and Fidelity assembled by local carmakers.
Similar to other products that made debut recently at the IME, offering cars was seen as a positive sign to curb, and possibly eliminate, government intervention in pricing.
Observers have censured the Industries Ministry’s move to cancel auto offers as being “against transparency” which can and will render futile efforts to curb the government’s arbitrary intervention in the huge auto market.
There have been persistent calls by free market advocates and shareholders in the bourse on the government to rethink its apparently dysfunctional policies of imposing prices on goods made by companies in the stock market and let the market decide.
They argue that price caps set by the government are usually lower than the real prices and to the detriment of manufacturers and shareholders.
