Economy, Auto

Officials Discuss Auto Sector Stagnation

Officials Discuss Auto Sector StagnationOfficials Discuss Auto Sector Stagnation

As Iran's auto sector stagnates, several automotive manufacturing units, including auto part makers, are struggling to survive.  

The severity of the situation has gone so far that auto manufacturing units have had to lay off 10,000 workers in the past two weeks, Tasnim News Agency reported.

In the face of these unpleasant facts, the parliament's industries and economic commissions held several meetings with the Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh to sort out the situation.

According to lawmakers present at the second meeting held on Sunday, state officials put forth short- and long-term solutions to help auto manufacturers and auto part makers solve problems related to lack of working capital.

Officials suggested that auto manufacturers should retrieve their money from foreign buyers, such as Venezuela which is in debt to Iranian carmakers to the tune of $85 million.

Settlement of debts owed by the Transportation and Fuel Management Committee was also discussed. Reportedly, the organization owes 3.5 billion rials ($100,000 at market exchange rate) to the automakers.  

As an incentive for customers to purchase local cars, officials called for easing bureaucratic processes and banking procedures people must go through to receive automotive loans.

The issue of providing automakers and auto part manufacturers with low-interest emergency loans was also discussed and government officials said the Central Bank of Iran will be consulted over this matter.

A final decision has not yet been made on the amount of loans that will be provided to the automakers. However, according to the MPs, the ministry's officials want to provide 10 trillion rials ($290 million) to the country's leading carmakers: Iran Khodro and Saipa.

Recently, the government spokesman, Mohammad Baqer Nobakht, announced the allocation of 2,000 billion rials (approx. $59 million at market exchange rate) in aid to the same automakers.

It is not clear where the government plans to provide these funds from, as most banks are lacking resources.

While many other industries are also struggling with lack of working capital, providing loans to carmakers has been criticized by several officials who believe that the automotive officials have strong lobbies in the parliament and the Industries Ministry, which coax others into providing them with financial aid.

Opponents of this matter believe that the vicious circle of providing money to an industry which has been unable to settle past debts must break. Some have suggested that the loans should be given to auto part makers as a debt settlement on behalf of IKCO and Saipa.

Selling the debts owed by auto part manufactures to banks at a discount rate to cover their shortage of liquidity was also discussed.