Time Finally Running Out for Iran Khodro and SAIPA

Low quality cars that rule local automakers’ logbook were again pushed into the lime light this week when Traffic Police chief announced that license plates will not be issued for 25 substandard models.

“As per a mandate issued by the Ministry of Industries, issuance of number plates to 25 substandard models have been suspended,” state TV quoted Taqi Mehri as saying.

The models include some versions of SAIPA’s infamous Pride and Ario (Zotye Z300), Iran Khodro’s Peugeot 405 with XUM engine, Bahman Group’s Besturn B50F and several Chinese-derived cars assembled by local carmakers Modiran Vehicle Manufacturing Co. and Kerman Motor.

“Low quality cars spew poison into the air, flout safety rules and endanger people’s life,” Mehri declared.

The traffic police chief was echoing earlier comments by deputy director of Institute of Standards and Industrial Research of Iran (ISIRI). Last week, Peyman Pirayesh said “Several Iranian carmakers have failed to acquire Type Approval certificates from ISIRI for 25 models. Therefore, issuance of license plates for these cars and their production must, and will, be halted.”

All domestic carmakers have been required as of Dec. 22 to acquire Type Approval certificates for the vehicles they sell in Iran. Type Approval certificates are legal documents that verify a product’s compliance with relevant standards and regulations.

The new requirements are part of ISIRI’s push for implementation of a more stringent automotive standard known as the Islamic Republic Car Assessment Program (IRCAP).

The system is scheduled to come into full force by January 2019 and will include 30 new regulations with the total number of automotive standards reaching 85. The plan is supported by Iran’s Automotive Policymaking Council, a government body that oversees performance of local carmakers.

 Earlier Warnings

ISIRI Director Nayereh Piroozbakht had issued a warning to the auto manufacturing companies in summer to fall in line. “Production of vehicles that fail to comply with the 85 automotive standards will be halted by the end of 2018.” This was not the first time she censured carmakers for low quality and stressed that if necessary they will be forced to halt production of such vehicles.

At the time, her comments were dismissed by the former SAIPA boss Mahdi Jamali. In a supercilious tone he said, “Ms. Piroozbakht is overstepping her boundaries …ISIRI is simply not in a position to say whether or not a car can be produced.”

Whenever there is talk of halting production of low quality cars, SAIPA’s Pride is on the top of the sin list. The vehicle is notorious for poor mileage, high emission rate, and simply put, a major road hazard. However, if Piroozbakht has her way,  “There will be no cherry picking. All substandard cars have got to go.”

In a defiant tone Jamali says, “there is high demand for Pride, and the company will continue to produce the model until demand runs out.” The model is the cheapest car ($5,300) in the domestic market.

The ISIRI warnings, argument and counter-arguments were put to rest in May last year and carmakers preferred to forget the ultimatum. However, reality knocked their doors this week. As soon as comments by Pirayesh made headlines in the press, carmakers started whining about “sudden imposition of stringent rules.”

The Iran Automakers Association (IAMA) has written a letter to the Head of Industrial Development and Renovation Organization (IDRO) Manosur Moazemi saying, “If the new standards are imposed local carmakers will be forced to shut down 70% of their production lines.”

According to IAMA, “If IRCAP is implemented production of four models, namely Peugeot 405, Samand, Pride and Tiba must be halted.”

Peugeot 405 and Samand are produced by Iran Khodro and have a 54% share of the company’s total output.

The company manufactured 243,009 units of the two models in eight months to Nov. 21, indicating 0.8% year-on-year increase.

Pride and Tiba are made by SAIPA. During the eight-month period, 232,132 units  were produced (up 19% YoY) accounting for 62.2% of cars made by the local carmaker.

The four models have a 53% share of the total national output.

 Futile Response

In response to the renewed criticism, SAIPA boss Mohsen Jahrodi told reporters, “Phasing out Pride is a complicated process. Several local firms supply parts for the production of this car. Thousands of jobs are at stake. The company [now] must decide what to do.”

In an unimpressive defense of his company and its poor performance, he said “We will not be able to produce any vehicle in the price range of Pride.” Pride is sold for 230 million rials ($5,300) and is the cheapest car available in the domestic market.

He concurred that the company will comply with the rules and “if it is decided that the production of Pride will continue, the quality will be upgraded.” However, it is not clear how SAIPA will upgrade the car it has been producing for almost three decades and why it did not do so earlier.

SAIPA says it has sold over 7 million Prides since production started in 1993 in Iran. Pride is based on a Kia Motor’s hatchback from the 1980s.

The South Korean firm ended production of this car in 2000.

Earlier in August SAIPA said it will phase out the Pride. During the eight months to Nov. 21, the company produced 125,799 units of the model -- 2.7% year-on-year decline.

IKCO has been silent so far.

Officials at ISIRI and the Traffic Police are not alone in demanding an end to the production of low quality vehicles. Deputy minister of roads, Davood Keshavarzian, says, “Motor vehicles manufactured in Iran are among the least safe in the world.”

However, Sodeif Badri, a lawmaker says, “The profit margins of substandard vehicles that contribute terribly to air pollution are high.” Disregarding the human cost of the lucrative business, “local carmakers are reluctant to stop production of such models,” he rued.

While the recent reports have renewed hope among the people and market observers that they may finally see the end of low quality vehicles like Pride in less than a year, many still have strong reservations.

They recall that it took almost half a decade of pushing by the government and NGOs to force IKCO to halt production of its outdated Paykan in 2005.

The locally popular sedan was based on the UK’s Hillman Hunter which was manufactured by the main local carmaker for over 40 years.