The Iran Mercantile Exchange will for the first time issue 20 trillion rials ($465.1 million) in special auto standard salaf contracts to help fund auto manufacturers, an IME official said.
"The contracts for 2,000 Cara vans will be offered next week and the funds will be used for financing Bahman Khodro, the producer of the vans," Rahman Arasteh, head of IME Derivatives Market, was quoted as saying by SENA on Tuesday.
"The contracts will have 2-year maturity and can be traded in the secondary market the day after the first offering," Arasteh said.
Standard salaf contracts are issued to help industries and businesses gain access to affordable funding, he said.
"Two other auto makers and an auto part maker also are in the process of using such funds," he said without elaboration.
The decision was made to help carmakers reduce the final cost of their vehicles, he said, "It is expected that public investment in auto production companies could make a difference."
According to Arasteh investors can expect 36% to 44% return on the initial investment.
Standard parallel salaf is an Islamic contract similar to futures, with the difference being that the contract’s total price is paid in advance.
IME is a multi-commodity exchange based in Tehran. Founded in 2006, it trades in agricultural, industrial and petrochemical products in the spot and futures markets.
The IME hosted 25.6 million standard salaf contracts during the first ten months of the current fiscal year that ends in March. The market recently added new commodities to its portfolio, such as gold, pistachio, saffron and autos.
Auto Offers Resume
Local media reports last month said car sales via this market have been suspended until further notice. However, the market announced on Tuesday that it will resume offering cars following a recent decision by the High Council of Bourse, the top policymaking body of Iran's capital market.
Market observers say selling cars via the IME has been a success. Since the beginning of the fiscal year in March, auto offers at the IME increased rapidly underpinning the long-awaited demand for transparency, unlike what customers encounter in the free market.
Auto trade in the exchange reached 46,221 vehicles in ten months with Peugeot 207s topping the list at 17,200 vehicles. In the same period 4,970 Tara cars, produced/assembled by Sipa were sold followed by 3,606 Shahin by the same company, 1,978 Fidelity sedans manufactured/assembled by Bahman Motor were sold along with 4,105 Haima of Iran Khodro and 1,314 Dignity brands.
Bahman Motors also sold 1,598 Kara pickups, a popular vehicle in Iran originally produced by Mazda. Data show that 876 Lamari Eamas of Arian Pars Motor, 69 KMC T8s by Kerman Motor and 68 JAC S5s by Kerman Motor were sold since March.
Heavy-duty vehicles, FAW and EM Power brands from China assembled by Bahman Motors and Siba Motor in Iran, were also popular. A total 207 Empower puller trucks by Bahman Diesel and 125 FAW puller trucks by Siba Motor were traded.
Auto sale was temporarily suspended by the Industries Ministry last May. It argued that the practice was incompatible with the aim to regulate the volatile auto market. In July the ministry backtracked and the High Council of Securities and Exchange agreed to offering selected brands.
Per procedures, only cars not subject to pricing mechanism by the government are offered at the IME. The Industry Ministry said earlier it wants to offer some 900,000 domestically-made cars via the IME in the next 6 months.
Imported cars are also set to be offered at the IME later this month if the prerequisites are met. So far there are orders for 40,000 foreign cars. Permits for sale and number plate registration have been received and there are no impediments for import or customs clearance of foreign cars.
It is estimated that with the increase in car sales the market will be saturated and cars will lose their luster as a capital good. With the rial taking a historic drubbing in recent months people in a desperate hunt for safe havens have rushed to the gold, forex, real estate and car markets to protect their life’s savings.
