While carmakers and auto dealers expected a surge in demand during the closing days of the current Iranian year (ending March 20), the head of Tehran Auto Dealers Association said car sales have plummeted.
“In the past three weeks, the auto market has observed a sharp fall in demand,” Saeed Motemani was also quoted as saying by Young Journalists Club.
As is customary in Iran, demand for goods from food to vehicles spikes as the year comes to an end and families prepare for the New Year holidays. However, according to Motemani, demand for vehicles has fallen below projections.
"The price of locally manufactured vehicles has registered a hike of 18-80 million rials ($380-1,700) over the past few weeks," he said.
Motemani believes that the recent decline in demand is due to the surge in prices.
In recent months, local carmakers have introduced several new models, including Renault Sandero Stepway and an upgraded version of Peugeot 207. Both models were warmly welcomed by car buyers. However, the automakers are unable to meet the local demand due to the low production rates of the two models, which has given rise to a price bubble.
“For instance, Peugeot 207 with automatic gearbox is priced at 490 million rials by Iran Khodro [the vehicle’s local manufacturer], but the model changes hands for 570 million rials ($12,000) in the open market,” he said.
“Pars Khodro, the local producer of Sandero Stepway, has put a price tag of 500 million rials ($10,500) on the vehicle with manual transmission but the vehicle is sold for 570 million rials ($12,000) by the dealers.”
In addition to the price hike, market insiders are of the opinion that auto market stagnation can also be a side effect of recent volatility in the foreign exchange market.
The rial was trading at 44,700 to the dollar on Saturday, strengthening from 49,000 more than a week ago. But money exchangers across the country were not trading in the greenback and a few had the euro for sale.
Last week, forex rates declined after the Central Bank of Iran introduced a rescue package for the rial. As a result, the national currency continued its gain against the US dollar, as the CBI pushed through with efforts to stabilize the currency that had lost a quarter of its value within six months.
The forex volatility has drawn money away from the auto market and encouraged many to invest in the greenback or gold.
Furthermore, Iranian carmakers have forged several joint production deals with their foreign counterparts. IKCO has signed a deal with Peugeot, SAIPA with Citroen, Kerman Motor with Hyundai and the government-backed Industrial Development and Renovation Organization has forged a deal with Renault.
Based on the aforementioned contracts, several new models are to be manufactured in Iran with the first offerings arriving in the market during the first half of the next Iranian year. Some car buyers may also be delaying any purchase plan, as they wait for the new models.
