Economy, Business And Markets

Auto Manufacturers Hunting for Solutions

Auto Manufacturers Hunting for SolutionsAuto Manufacturers Hunting for Solutions

As the government has recently increased taxes on automobiles, manufacturers have been left with no choice but to raise prices to compensate their loss, deputy minister of industry, mine, and trades Biuk Ali Moradlou said.

In an ideal market where manufacturers make reasonable profit, tax raise can be compensated without a hassle. The case however is not so in the domestic auto manufacturing sector where tax raise results in loss and manufacturers see no other way out but to increase prices, Forsat Emrooz quoted him as saying.  

Manufacturers, who have decided to increase prices in the coming year (beginning March 21) believe a logical solution would be to implement value added tax to the total price and oblige customers to pay the amount, said the official adding that “the issue must be properly addressed at the macroeconomic level.”

Although manufacturing has relatively improved over the past two years, in order for prices to be consistently stable, auto manufacturing must reach the peaks it once hit nearly five years ago, the official said.

Minister of Industry, Mine and Trade, Mohammadreza Nematzadeh has sent three letters to president Hassan Rouhani, Vice President Es’haq Jahangiri, and head of Management and Planning Organization Mohammad Bagher Nobakht claiming that the domestic auto market is not monopolized thereby urging the officials to liberalize car prices.  

In radical opposition, member of Auto Parts Manufacturers Association, Bahram Shahriari believes that if the domestic auto manufacturing industry was not monopolized by the government, poor quality vehicles would not have been manufactured for decades.

He suggested that if the private sector actually had a say in the auto manufacturing industry, new models would have been designed and manufactured by now.

According to Shahriari, all the criticism about issues such as total prices, raw materials and salaries take root in the fact that the automobile market is monopolized by the government.

Iran’s auto industry is now operating for more than 55 years; however, only 1.5 million cars are manufactured annually. The figure has dropped further ever since the West imposed sanctions on Iran over the country’s nuclear energy program.

A realistic glance at the status quo would reveal that the domestic auto manufacturing industry, which should function as a key force in the economy, is actually far from economical and cannot meet the expectations of domestic customers.

Given the dire circumstances, it becomes clear as to why low-quality Chinese-manufactured vehicles have flooded the Iranian market.

Manufacturing and economics should not be reduced to mere political sloganeering Shahriari stressed, adding that with the effective involvement of the private sector the shortcomings of the auto sector could be fixed and the industry can bounce back to better days.