Iran Tire Industry Association and its members have received the required permits to increase the prices of locally made tires by 9.6%.
“Upon tire manufacturers’ request to raise prices for locally made tires, the Consumer and Producer Protection Organization and other related authorities have given the green light to the makers to hike prices by 9.6%,” speaker of the association, Mostafa Tanha, was quoted as saying by local automotive website Asbe Bokhar.
Tanha underlined that increasing prices above the permitted limit is a violation subject to prosecution.
“Tire makers should initially declare their proposed prices to CPPO, afterwards they get to introduce products with updated price tags to the market,” he added.
Earlier Zoomit.ir quoted Mohammad Reza Ganji, the association’s head, as saying, “In the last four years, local tire prices have experienced no change,” indicating that considering the sharp rise in production costs, the price hike is essential to the sector’s survival.
Endangered Industry
During recent weeks, one of the issues that the Iranian industries have been struggling with has been gaining access to subsidized hard currencies provided by the government at the exchange rate of 42,000 rials to the US dollar.
With the value of the local currency sliding to unprecedented lows, the greenback changes hands at the exorbitantly high rate of over and above 85,000 rials in Tehran’s gray market.
One of the main issues in making local tires is importing raw materials—an intensely forex-dependent case; however, domestic tire manufacturers do not seem too pleased about the current procedures in allocating the subsidized currencies as the system is riddled with numerous flaws.
In this system, locally known by the acronym Nima, importers declare their currency needs, exporters–including the government as oil exporter–register their foreign currency earnings, and banks and money exchangers act as mediators. Central Bank of Iran will exert oversight and supposedly has better control over market supply and demand.
The limited access of the tier makers to subsidized currency has bottlenecked raw materials imports which in turn have hampered local production.
Abbas Abbasi Abyaneh, CEO of the major Iranian tire producer Barez Industrial Group, says, “Presently, tire plant warehouses merely contain as many products as the output of a single day, and if forex issues are not resolved [soon], the industry as a whole would be endangered.”
He further pointed to the slow functioning of Nima that has resulted in failing to place orders for some tire components.
While the slight increase in prices may bring some solace to the makers, certainly more efficient planning and if need be government intervention are the key to preserving the sector in the long run.
