The car battery market will face supply problems come summer when demand normally increases largely due to problems associated with shortages of raw material and supply chains, the head of the Iran Society of Battery and Storage board of directors and CEO of Azar Battery Company.
"The market will face supply snags when demand for batteries reaches peak in the hot season. Needless to say, there is a huge deficit of raw materials in the domestic market that has undermined battery production,” Kazem Mortaz was quoted as saying by the Persian automobile daily Donaye Khodro.
Regarding high battery demand and its impact on the market and consumers this year, Mortaz said: “Since last year, barely 200 tons of lead has been offered twice at the Iran Mercantile Exchange. Our raw materials are being exported and the battery industry is obviously getting a big hit. That said, manufacturers are simply not willing to supply enough batteries to the market in the coming weeks."
He went on say: “Lead, one of the main raw materials of lead-acid car batteries, is being exported to other countries and battery manufacturers have to buy it at a price higher than world prices. Other raw materials like petrochemicals and the likes are saddled with similar situations.”
Lead producers do not supply to the domestic battery manufacturers because they make fatter profits from export, the CEO noted. “This [key] raw material is exported to South Korea at a price lower than international prices. This is because producers know well that normally it takes two months for the foreign currency to be transferred to Iran and during this period forex rates keep climbing. Thus export is much more lucrative!”
The currency market in Iran has been in chaos forever with the result being that the national currency has lost value unseen in modern history. One US dollar bought 300,900 rials last August but today goes for 540,700 rials and counting.
Regarding other bottlenecks battery producers face, he revealed that local carmakers have not paid battery producers for the past 60 days creating many new challenges for the many companies that deal with the auto industry.
In the coming weeks, battery consumption and demand will reach peak as summer arrives and companies expect to receive their orders on time.
Last summer there was a flood of complaints and criticisms about the lack of responsibility of large battery companies. Businesses were frustrated with the suppliers because they either did not receive their orders as agreed or did not receive them at all.
As of now, battery sale in the shops are suspended and market observers rightly claim that the manufacturers want to jack up prices as is often the case with most consumer goods.
If the past is anything to go by, when any key item disappears from the market, the majority of the people believe, the undeniable reason is that its price will jump. And that is exactly what happens!
Auto Part Market Unstable
Spare part manufacturers too are saddled with more than their fair share of problems as the raw material supply chain takes a drubbing – a universal challenge hurting big and small companies alike across continents.
They have to import some key raw materials not available domestically, which has become problematic due to a whole set of reasons, namely the US economic sanctions, steep forex rate fluctuations and poor currency allocations.
Navid Habibi, a spare part manufacturer, told Khabar Khodro.com (a website that covers automobile news) that companies importing raw material and producing spare parts have been waiting for forex allocation for a long time.
“A large number of spare part companies shut production lines in February due to the lack of raw material, which will have its ramifications on the market within the next two to three months,” he warned.
Habibi noted that importers literally had “a stroke” due to the non-allocation of foreign currency by the government and the jump in forex rates.
“The spare part market is going to face more challenges this year compared to the recent past. The continuing surge in exchange rates triggered by galloping inflation and the annual wage increases in the new Iranian year [started March 21]” has become a dilemma with no solution in sight, he added.
The businessman stated that the implementation of the product ID Registration Plan plus the Taxpayer System (tax.gov.ir) Plan and the mandate to use them are other new challenges facing this industry.
“Surveys indicate that 75% of the auto part industry is unable and unwilling to implement the two plans due to a lack of software infrastructure and technical knowhow.”
The Ministry of Industries, Mining and Trade’s new Product ID Registration Plan is aimed at identifying smuggled or counterfeit products, as the product ID identifies the manufacturer.
Taxpayer System is a system for the exchange of information between the Iranian National Tax Administration and the taxpayer, in which each taxpayer has a profile.
Asked if vehicle production targets will affect spare part producers, he said realization of the production target of 1.8 million cars this year will show its effect on the spare part market in two to three years and should be able to boost spare part production.
“This is because new cars need spare parts after two to three years.”
Habibi noted that the imbalance between spare part supply and demand also triggers inflation from the latter, which leads to higher prices even if the exchange rate were to remain constant”, which again is highly unlikely.
