Iran’s Derailed Auto Market Getting Back on Track

EghtesadOnline: Iran's auto market was last month watched in astonishment by jittery customers and bewildered citizens in the face of skyrocketing prices. In order to redress the volatile situation and put in check the spiraling uptrend which had driven car prices to unprecedented highs, the country's two largest carmakers launched extensive sales of vehicles in the past few days.

News ID: ۷۴۵۵۲۰

24 June 2018

Starting from the final days of Ramadan (June 15), SAIPA and Iran Khodro supplied the market with vehicles via online preorders and under conditions which made the purchases feasible to the public, in an initiative to mark the auspicious occasion of the holy fasting month.

The unhinged car market calmed down following IKCO and SAIPA's e-sales. According to the two carmakers' official websites, IKCO is gradually injecting 220,000 vehicles into the market and SAIPA has put 100,000 cars up for sale.

The two car manufacturers are offering special packages to the eager population bent on turning their money into commodities to hedge against the raging inflation, Financial Tribune reported.

During the past few months, the Iranian rial's value has plunged to unprecedented lows compared to hard currencies, with the US dollar being exchanged for up to 75,000 rials on the open market in Tehran.

Customers can pay for the vehicle upfront, or through various installment plans according to their preference.

>SAIPA

SAIPA is offering various models, including Pride, the locally-designed Tiba, and Saina, the midsize sedan Chinese-derived Ario (Zotye's S300) and Changan CS35, along with the Brilliance family including H330, H320, H230, H220 and C30 Cross, as well as several pickup models and Kia Ceratos assembled in Iran.

The manufacturer's e-sale website received over five million visits in merely six hours after the sale was launched. Only in a few hours, SAIPA had sold 1,500 locally-assembled Kia Cerato models.

In order to curtail the role of middlemen in the market, the sale is designed in a way that only allows the purchase of vehicles for those who have not used their Identification Numbers in the past six months to buy cars.

SAIPA's public relations deputy Mojtaba Nazari is adamantly against intermediaries disrupting the market, stressing that "purchasing via the website will lower the chances of middlemen derailing the market [again]."

>Iran Khodro

Some of the models offered by IKCO include Peugeot 405 and its spin-off Peugeot Pars, the popular Peugeot 206, the locally-designed Samand and Runna, the Chinese-crossover Haima S7 and the family car Dena.

The models are to be delivered to customers between the upcoming September to March 2019.

The overwhelming visits to IKCO's website slowed the servers and prompted the company to apologize to the public for the inconvenience.

Earlier, both makers were slammed by market observers that they had bottlenecked supply which had consequently led to a sharp jump in prices.

In response to the accusations, an official with IKCO, Mostafa Khankarami, says the company's parking lots have the capacity to accommodate only up to 6,000 vehicles. This is while the unconfirmed reports claimed that the maker has hoarded tens of thousands of vehicles.

Khankarami added, "From the start of the current fiscal on March 21 until June 17, IKCO manufactured 120,000 vehicles, and the company has delivered 116,500 of which to customers."

>Hubristic Dealers

Ramazanali Sobhanifar, a member of the parliament's Industries and Mine Commission, says the car sales launched by the two major manufacturers in the country have deflated the price bubble to some extent.

Sobhanifar is of the opinion that the sharp rise in the vehicle prices was not triggered by manufacturers and was a handiwork of profiteering car dealers.

According to Sobhanifar, the surge in prices is due to the meddling of many unscrupulous middlemen along the supply chain. He further notes that the current uptick in the forex market and the heated psychological atmosphere triggered the sudden hike in prices—40% in some cases.

On a hopeful note, Sobhanifar says IKCO and SAIPA's sales will likely soothe the volatile market.

The lawmaker added that the official car prices are to be increased in the coming months. He says, "Cars priced under 450 million rials ($10,700) are to see a 7.5% hike and vehicles above 450 million rials will experiences increases by 9.5%."

The state body in charge of regulating Iran's auto market for vehicles priced under 450 million rials ($10,700) is the Competition Council. Headed by Reza Shiva, the institution keeps an eye on a wide range of domestic products and sets prices for some goods including for the aforementioned vehicles.

Vali Maleki, another member of the parliamentary panel also discussed the situation with reporters over the weekend.

"One of the main culprits in the price jumps is the US president's withdrawal from the 2015 nuclear deal." According to him, Donald Trump's pullout temporarily shocked the market into a state of chaos.