Domestic automakers are experiencing losses due to command pricing and supply-demand problems, according to an automotive expert.
"The conditions created by sanctions in the last few years have reduced the production of major car manufacturers due to the rise in overhead costs. This while the Ministry of Industries, Mining and Trade did not permit an increase in prices. As a result, Iran Khodro Industrial Group suffered an average loss of 200 million rials [$634] and SAIPA Automotive Group registered a loss of 150 million rials [$476] from the sale of each car, which indicate an average loss of 175 million rials [$555] per car," Reza Aryarad was also quoted as saying by Donyaye Khodro.
Asked what is the best solution to reduce the losses of domestic car manufacturers, he said liberalization of car imports could be used by the government to balance the market, as it would allow those who have the financial ability to buy foreign cars.
The expert noted that due to the volatility of foreign exchange rate and restrictions imposed by sanctions, the low price of products set by the government has become an obstacle to compensating the accumulated losses of car manufacturers.
“Entering the Middle East markets is the second option for domestic automakers,” he said.
This makes little sense because the regional markets have access to high quality foreign cars.
Aryarad said Western sanctions have caused Russia car manufacturers to be drawn toward Iranian parts manufacturers.
"In such a situation, the supply chain of auto industry parts should focus on exchanging and meeting the needs of that country's market. Because in that case, production will increase and the final price of parts will become affordable for both countries," he said.
Import of Cheaper Cars Will Hurt Domestic Automotive Industries
If the prices of imported cars are lower than those of Iranian cars, the domestic car and component industries will face problems, according to a member of the board of directors of the Association of Homogeneous Propulsion Industries and Component Manufacturers.
“In the field of imported car, the government is considering a special mechanism that sets higher or lower tariffs for cars with different engine power. Such a mechanism, while creating competition and improving the technical knowhow of car and parts makers, will not harm domestic production,” Alireza Khalili was quoted as saying by Khabar Khodro.
“Cars that enter Iran must be at a price level that helps create balance in the domestic market and achieve an equilibrium compared with the prices of imported cars in the international market,” he added.
Noting that import tariffs determine the price, the official said, “The prices of imported cars are naturally lower than the prices of domestic cars, and what increases the final price is the [customs] tariff rate. Therefore, the establishment of balance in this field can prevent any harm to the domestic cars and parts manufacturing industries.”
Khalili stressed that the tariff rate should not interfere with the import of parts and raw materials.
Asked whether the priority is importing cars or parts, raw materials, technology, machinery and equipment, he said the ban on imports in the last few years has deprived Iran of the latest technology.
“The current quality problem of domestic cars is due to the lack of access to machinery, state-of-the-art knowhow and good quality raw materials. If access to these resources is provided, many problems in the car industry will be solved,” he added.
In other words, the import of machinery and technology must be prioritized over car imports.
“Iran has a history of producing cars such as Jeep, Benz and Fiat, but problems in political relations have impacted the car industry’s condition. It is not possible to be content with just producing domestically. We should use the technological knowhow of foreign automakers to increase the quality of domestic cars,” the official said.
Referring to Turkey as a manufacturer of cars and parts, as well as an automotive importer and exporter, he noted that studying and following the example of other countries' policies in the field of automobile manufacturing, in the long run, will turn Iran into an automobile manufacturing country with competitive products.
Khalili stressed that the government should ease car imports and currency transfer because the current conditions are associated with high risk and low reliability, so the government’s flexibility can improve the situation.