An automotive official said quality should not determine the price of a vehicle, as it puts pressure on component makers, raw material producers and workforce due to the lack of favorable production conditions.
Mahmoud Najafi-Sehi, a member of the board of directors of the Association of Homogeneous Propulsion Industries and Component Manufacturers, added that at times, production is not profitable or there is not sufficient liquidity to improve quality and spend money on R&D issues, whereas liquidity impacts car quality, Khabar Khodro reported.
“If the products are sold at high prices but the quality is poor, the manufacturer must be held accountable so that the rights of buyers are not compromised,” he said.
The official noted that automakers apply strict standards to improve the quality of parts delivered by domestic manufacturers, but what matters is the level of compliance with the standards required by automakers in parts production and the status of quality control in the warehouses of automakers or supplier companies such as Sazeh Gostar and Saypco.
Najafi-Sehi stressed that lack of liquidity is one of the factors behind the automakers’ negligence in controlling the quality of parts, but the delivery of low-quality, costly cars is unacceptable.
"Technology is improving daily but domestic vehicles are currently produced with the technology of the past 30 years," he said.
Technology is improving daily but domestic vehicles are currently produced with the technology of the past 30 years
“If we want to continue the production of current vehicles, we must follow an integrated plan to produce up-to-date cars in terms of standards and quality, otherwise performance will differ in older cars.”
Referring to quality improvement strategies, the official said, “The observance of automotive standards in the delivery of parts, solving the liquidity problem and paying the dues of parts manufacturers so that they are not forced to reduce quality, as well as external factors such as the quality of raw materials such as sheets, steel and paint, influence quality improvement or deterioration, as well as production capacity and consumer satisfaction.”
Najafi-Sehi noted that the independence of component manufacturers features in the quality transformation plan compiled and presented by the Iranian Quality Association as an important link in the automotive industry’s supply chain.
“If the views of parts manufacturers and automakers have been incorporated in the development of this plan, it is acceptable and should be observed, but if the prerequisite for its implementation is to solve some problems, external obstacles and difficulties in the supply chain, in addition to the hurdles facing automobile manufacturers, they should be perceived in the plan’s development,” he said.
Automakers’ Debt to Parts Producers
Liquidity is one of the main problems in the component manufacturers’ supply chain, as domestic auto producers have huge debts to parts makers.
The domestic auto industry's debt to parts makers has reached 450 trillion rials ($1.45 billion), according to a member of the Iran Auto Parts Makers Association,
Reza Rezaei also told the Persian economic daily Donya-e-Eqtesad that the massive debt has built up over the years, such that around 120 trillion rials ($387 million) of the total only pertain to the previous fiscal year (ended March 2021).
Noting that parts manufacturing companies employ hundreds of thousands of people, the official warned that if the carmakers are not given a loan right away, the situation could spiral into a crisis, with many people losing their jobs.
Arash Mohebbinejad, secretary of the association – a lobbying arm of the industry and the official debt collector, said if non-payment of debt can be construed as a crisis, the chronically indebted Iranian automakers have perpetually been in crisis mode.
After US ex-president, Donald Trump, pulled out of the Iran nuclear deal and reimposed crippling sanctions on Tehran in the summer of 2018, the Iranian auto industry's woes became even worse.
With nearly a million jobs at stake, the Iranian government has been more or less supportive of the automotive businesses.
Last year, the Iranian government and the Central Bank of Iran ratified an auto industry rescue package worth 100 trillion rials ($322.5 million) to help Iran Khodro Company and SAIPA settle their debts to parts makers and boost production, according to media reports.
Mohebbinejad chastised CBI for not being "helpful", claiming that the funds have not been delivered in full to the automakers yet.
"Parts makers were forced to lay off 150,000 workers after sanctions were imposed," he says, stressing that these people are still looking for a job and the situation may deteriorate if nothing is done soon.
