New Rules and Slumber of Iranian Carmakers

EghtesadOnline: Hard-pressed auto manufacturing industry already under mounting pressure for its poor quality and high prices should prepare for a new challenge in the coming weeks. The state is due to raise the bar and announce a new set of automotive standards. Form what is known, most vehicles made by the two major car companies Iran Khodro and SAIPA will not be able to comply with the new norm.

News ID: ۷۴۶۱۹۸

06 November 2018

The new automotive standard, known as the Islamic Republic Car Assessment Program (IRCAP), will come into force in January. Industry observers say four models manufactured by IKCO and SAIPA, namely Pride, Tiba, Samand and Peugeot 405, are simply not of the quality and type that can meet the new standards.

ISNA has published a report about IRCAP and the possible impact of its full-force introduction on the local auto industries, predicting hard times for the beleaguered sector that has long become used to complacency and sloth.

In recent months, and following the reimposition of US sanctions, Iran’s auto sector has been hit hard. In the first half of the current fiscal, the automotive companies reported a 15.1% year-on-year decline in production with output dropping to 582,747 cars and commercial vehicles from 686,687 units a year earlier, according to Financial Tribune.

Production at the largest auto companies, Iran Khodro, and SAIPA fell by 23.1% and 10.7% respectively compared to the same period last year and dropped to 251,964 and 254,982 units.

>Where ISIRI Steps In

The higher automotive standards have been set by the Institute of Standards and Industrial Research of Iran (ISIRI) in collaboration with the Ministry of Industries. It should presumably include stringent regulations with the total number of mandatory standards reaching 85.

Introduction of IRCAP has been phased so as to control the (negative) impact of the new standards on the auto industries and the local car market.

The first phase of the scheme went into effect in January 2018 when production of 25 models was banned because they had failed to reach the first 61 conditions outlined by ISIRI.

Among the 25 vehicles that were found to be unfit for the roads were Lifan X50 and X60, sedan MVM 315, Tiggo 5 (Chinese cars made/assembled in Iran), and Peugeot Pars with XUM engines, along with several versions of SAIPA’s small city hatchback Pride.

The second phase was announced in June and two new criteria were added to the previous 61 rules.  The requirements in this phase were mostly related to fuel efficiency.

At the time authorities released a list of banned vehicles made by Iran Khodro, Modiran Vehicle Manufacturing Company (MVM), Zamyad, Kerman Khodro, and Diar Khodro.

The SUV Haima S7 made by IKCO had its production permit canceled due to high fuel consumption. The Chinese SUV was being assembled in Iran since 2015.

Private automaker Kerman Khodro had to pull the plug on the production of its SUV, the JAC S5, with manual transmission and the mini sedan Lifan 820 with automatic gearbox. Both vehicles were produced in collaboration with Chinese firms. The S5 was in the local market for several years. Lifan 820 production began in May 2016.

The small automaker Diar Khodro also was forced to halt the manufacture of a gasoline-powered pickup truck Wingle 5 with manual transmission and the hatchback model BAIC BJ40L.

MVM, which represents the Chinese Chery's operations in Iran, had to stop production of the SUV model MVM X33S, a local variant of Chery Tiggo 3 sold since 2016.

The well-known Zamyad company also had to stop manufacturing the mini truck Z24PA.

> Usual Suspects

While nothing has been said this time around about how many more cars face production halt with the enforcement of the last phase of the standard, industry insiders say SAIPA’s Pride and Samand and Peugeot 405 made by IKCO will be among the models that will have to bid farewell!

Whenever there is the talk of banning the production of poor quality cars, SAIPA’s Pride tops the sin list. The vehicle is notorious for low safety, poor mileage, and high emission. Simply put, it is a major road hazard and experts simply fail to understand why this car is still produced and sold in the country.

SAIPA says it sold over 7 million Prides since production started a quarter century ago in 1993. Pride is based on a Kia Motor’s hatchback from the 1980s. The South Korean firm halted production of this car in 2000.

Given the economic headwinds blowing at full speed and the significant decline in local auto output, independent observers have cautioned that it is highly unlikely that the government would implement the final phase of the standard system. The state is likely to push the pause button on the plan to help save the carmakers from imminent insolvency.