Cars to Cost More in Iran

EghtesadOnline: Automakers will soon receive the okay from relevant authorities to increase prices once again, a deputy minister of industries said. Bad news that translates into a simple message for the common man: cars are gradually becoming luxury items most families cannot afford anymore.

News ID: ۷۴۶۱۱۵

16 October 2018

In an interview on Sunday, Mohsen Salehinia told Fars, “Car prices will for sure be updated. The amount to be added is being discussed at the Consumer and Producer Protection Organization (CPPO).”

After studying economic issues related to the auto industry, the CPPO will submit a report to another state body, the Market Regulatory Authority, an ad hoc committee created to check the raging inflation and price gauging. “The regulatory authority will announce the new prices.”

The senior industry official dodged every question about when the new prices will be announced or to what extent car prices would jump, according to Financial Tribune.

Prior to this, another state body, the Competition Council was in charge of supervising the prices of many domestic products, including cars. It used to set prices for some goods including cars costing 450 million rials ($3,214) or lower.

Salehinia declined to comment on whether or not the Competition Council was also involved in the process of determining the new prices. He said, “As per a mandate issued by the Economic Coordination Council of the Heads of the Three Branches of Government, currently, the Market Regulatory Authority is in charge of setting car prices in collaboration with CPPO.”

Factory prices of vehicles have not been updated [in recent months] in line with the rising foreign exchange rates, he told the news agency.

Domestic car companies rely on imports of some key automotive parts. The firms have claimed for long that they are under mounting pressure due to the higher forex rates and stringent government regulations that bar them from increasing prices.

In the spring of this year, the Competition Council permitted carmakers to increase prices by 5-7%.

Since the beginning of the current fiscal in March, the national currency has lost more than 70% of its value against all major currencies.

On Monday, the greenback was traded at 140,000 rials in the gray market. Industries and traders of all stripes have complained for months that it is almost impossible to function in the prevailing unstable and deeply chaotic forex market. But their appeals and cries for help to save jobs and endure have fallen on deaf ears.

> Market Prices

While the deputy minister of industries claims car prices have not been updated for months, market observers and the public at large report price rises almost on a daily basis.

Two models that have been vastly popular with lower-income families are the Peugeot 405 made by Iran Khodro and the Pride produced by SAIPA – the two biggest carmakers.

On Monday IKCO’s Peugeot 405 was sold at 510 million rials ($3,642) indicating a 59% increase since the beginning of the current fiscal, started in March, when the sedan carried a price tag of 320 million rials ($2,285).

SAIPA’s Pride, which was sold for 220 million rials ($1,571) in March now comes at the exorbitant price of 350 million rials ($2,500) – up 60%.

A point that merits mention is that there has always been a huge gap between factory and market prices of vehicles made in Iran and the difference has become much bigger in recent months. For instance, the factory price even now of Peugeot 405 is 329 million rials ($2,350) and Pride 229 million rials ($1,635).

With the rial hardly worth the paper it is printed on and in a move economists call an outright textbook example of herd mentality, many Iranians anxious about losing their life’s savings and desperate in wanting to convert their cash into safe-haven assets, have turned to the auto market.

With increasing demand for vehicles, dealers have had a field day charging people outrageous prices—seen by the public as outright robbery.

It is said, and understandably so, that Salehinia’s comments on the ailing and dysfunctional auto industry, will trigger a new surge in prices sooner rather than later.

His approach is another example of the tactics of the political elite. Hardly does a week pass without some senior official talking vaguely on camera about the magnificent job higher ups are doing round the clock to fight corruption and check inflation!

Apparently divorced from reality, those who talk about such old cliches and tired subjects produce nothing of value while the economic conditions and the hope of the people continue to decline and prices keep on rising at speeds unseen in recent times.