Ministry’s Car Import Oligopoly Proposal Criticized

EghtesadOnline: The head of Auto and Parts Importers Association has criticized a proposal by the Ministry of Industries, Mining and Trade to restrict car imports to a handful of mostly state-owned automakers.

News ID: ۷۴۲۶۰۲

09 July 2017

Calling the scheme a “misguided” decision, Meysam Rezaei added that narrowing down the list of auto importers to a select few will lead to market stagnation, IRIB reported.

According to the industry insider, if the proposal becomes law, at least 40 businesses will go bust overnight and several hundred people will be out of work.

Rezaei said the move will further distance automakers from independent production as well as research and development, Financial Tribune reported.

Currently, Iranian carmakers rely on foreign suppliers of auto parts for maintaining the production of several models.

In recent years, the administration of President Hassan Rouhani has pushed foreign companies to transfer technology to Iran through joint production deals with local carmakers.

In case the parliament provides automakers with a free hand to import cars and auto parts, all efforts toward establishing industrial and technological independence in the automotive sector would fail.

Rezaei believes the move will consolidate the already existing oligopoly of Iran Khodro and SAIPA (and by extension Pars Khodro) over the local auto market.

The two car companies, which had an 86.5% share of the market in the last Iranian year (ended March 20, 2017), are roundly slammed for offering substandard cars at exorbitant prices.

In addition to Rezaei, another prominent figure in the automotive sector has also strongly denounced the proposal.

Amrollah Amini, an auto expert and professor at Allameh Tabataba’i University, said what is hampering Iran’s auto industry from flourishing is the government’s protectionist approach toward the industry.

In a recent interview, Amini said the government must support a more competitive car market, which will force automakers to increase the quality of their products.

According to the academic, upgrading quality standards and forcing carmakers to partner up with prominent foreign automakers are key to expansion of Iran in the international auto market.

Amini noted that the overbearing regulations and allocation of government funds to semi-state companies are some of the hurdles that nip competitiveness in the bud.

The frequently changing laws and inconsistent regulations have increased investment risk in Iran’s automotive sector such that even locals are reluctant to invest.