Iran’s largest private automaker Modiran Vehicle Manufacturing Co., a partner of China’s Chery, at the weekend jacked up prices by a massive 55%.
In a statement published by ISNA, MVM said due to the significant rise in the USD exchange rate in Iran, the company has no alternative but to increase prices.
Since US President Donald Trump pulled out of Iran’s historic nuclear deal the value of the rial has plunged to unprecedented lows forcing industries and businesses of all types to raise prices seemingly without any government control or oversight. In worst case scenarios, companies have closed down and declared insolvency.
Currently, the greenback changes hands at the exorbitantly high rate of over 152,000 rials in Tehran's gray market. During the past six months, the rial has lost 72.3% of its value against all major currencies.
In order to keep factory wheels turning the government has launched a website named Integrated Foreign Currency System (locally known by its Persian acronym Nima) to track forex transactions involving banks, exchange houses, importers and exporters in real time. Nima offers services to industries including automakers.
On Saturday the official exchange rate on Nima was 105,848 rials for each euro ($1 = 124,900 rials). Prior to Trump’s controversial decision industries and importers of strategic and basic goods (food and medicine) bought the greenback at the subsidized rate of 42,000 rials and in rare cases at 37,000 rials.
MVM says that since the exchange rate has more than doubled “we should at the least have doubled the car prices. However, in order to uphold consumer rights, the price hike has been limited to 55%.”
>Company’s Status
Data released by the Ministry of Industries indicate that Chinese-derived vehicles have a 20% share of Iran’s total automotive output. Total output stood at 410,722 during the period.
During the first four months of the current fiscal, 82,663 cars were produced in collaboration with Chinese companies. MVM with a 23,196 vehicles has a 28% share of this market. The company reported 10.5% increase in its production rate during the period when total car output declined 0.2%.
Following the higher prices, MVM is offering 10 models costing between 649 million rials ($4,538) for MVM 110S and 2.77 billion rials ($19,356) for the Chery Tiggo7. The two models previously were sold at 419 million rials ($2,927) and 1.77 billion rials ($12,403) respectively.
Financial Tribune contacted several car dealers to check on the new prices but none were willing to give a price for MVM products. They refused to comment when asked why they would not want to give the price lists.
Furthermore, on the local online car dealing platform Bama.ir, the price tag for all MVM cars were removed on Monday.
>Overreliance on Foreign Supplies
For years local carmakers have been censured for overreliance on foreign auto parts with authorities and sections of the general public calling on them to localize technology, gradually reduce imports and expand collaboration with domestic parts manufacturers.
According to data released by the Iran Vehicle Manufacturers Association only 20% of the parts used by MVM are made in Iran and the rest is imported. Since MVM is Chery’s partner in Iran, it would not be wrong to assume that the parts are mostly imported from China.
According to statistics released by the Majlis Research Center, China has been Iran’s second largest source of auto parts imports after France.
During the first five months of the current fiscal which started in March, auto parts worth $1.3 billion entered Iran – up 57.5% year-on-year.
It merits mention that auto parts have topped Iran’s import bill during the past few years.
