Economy, Auto

Automakers to Receive Financial Aid

Automakers to Receive Financial Aid Automakers to Receive Financial Aid

Head of Iran's Management and Planning Organization Mohammad Baqer Nobakht and Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh toured Iran's largest auto manufacturing company on Monday.

They met with the head of Industrial Development and Renovation Organization, Reza Norouz-Zadeh, and CEO of Iran Khodro Company, Hashem Yekezare, to discuss IKCO's lack of working capital, Fars News Agency reported.

Following the visit, media speculations intensified about what was announced and what should be expected. Some media outlets reported that Nobakht mentioned on the sidelines of the meeting that 2 trillion rials ($58 million at market exchange rate) are to be given to productive industries as aid.  

After some had construed that the amount was to be given to the auto sector, the Ministry of Industries, Mining and Trade issued a clarification that the amount will be given to "productive industries in general and not to the auto sector per se."

According to Nobakht, the ministry will be "receiving the amount by October 22 to distribute it as they see fit."  

Iran's auto industry has recently been in dire straits, as it has been suffering from stagnation after citizens launched an online campaign refusing to purchase overpriced locally-made cars of low quality.   

Due to financial troubles at IKCO, a number of auto parts manufacturers have been refusing to provide the company with more parts, which means that IKCO will be forced to stop producing certain models.

During a press conference on Tuesday Nobakht explained that the auto sector is one of the country's largest industries.

"Consumers have every right to demand vehicles of better quality, therefore it is the government's duty to help this sector meet those demands," he said.   

"It is our responsibility to enhance local production in line with the Resistance Economy."

Resistance economy is a set of guidelines put forth by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei to reduce reliance on oil-based exports and boost domestic production.

Nobakht admitted that a large part of the criticism targeted at and the expectations people have from the auto sector is valid, which is why it is necessary to help this sector out of the current crisis.

According to the official, local vehicle production cannot be eliminated, "as this would only result in unrestrained vehicle imports and the government strictly opposes this".

Nematzadeh and members of two parliamentary commissions—industries and economic—had met in August to discuss automotive issues.

According to Hamidreza Fouladvand, the possibility of providing loans to the country's two largest auto manufacturers—IKCO and SAIPA—had been discussed during the meeting. The lawmaker stressed that automakers will be receiving the loans on condition that they primarily settle their debts to auto parts manufacturers.  

Ali Alilou, a member of Majlis Industries Commission, had said the loans discussed are to the tune of 40 trillion rials ($1 billion at market exchange rate), with Saipa and IKCO each receiving half the amount.

Objecting over this decision Alilou said auto manufacturers have strong lobbies in the parliament and the Ministry of Industries, Mining and Trade, which managed to coax the officials and help them receive another hefty loan.

While most industries suffer from lack of working capital and are on the brink of bankruptcy, banks claim that they do not have the resources to help.

"Providing a loan to the auto sector in this backdrop is a grave injustice to other smaller industries," he said.

Alilou noted that it would be a mistake to provide loans to industries that only incur losses, especially since the automakers have failed to repay their previous loans.