Car Prices in Iran at the Crossroads

EghtesadOnline: No decision has been made about increasing car prices, the Industries Ministry said in a statement released on Thursday following comments from deputy minister of industries Mohsen Salehinia to the effect that new car prices would be announced at the weekend.

News ID: ۷۴۶۲۳۳

18 November 2018

Salehinia told IRNA on Wednesday that “Car prices will be updated on Saturday or Sunday,” and added that the new prices would be in response to rising overheads of the auto industry, but “preserving consumer rights” has been taken into consideration.

A few hours after Salehinia’s comments were carried by the state news agency, the public relations office of the Industries Ministry rushed to make denials in a press release. “No decision has been made yet about updating car prices. Based on reports received by the ministry, measures will be introduced in due course.”

Denials and Ousters

Later on Friday, according to Financial Tribune, denying the credibility of IRNA’s report, Salehinia told Fars, “I do not have any information about [new] car prices… The comments ascribed to me were not exactly what I said.”

When questioned about the possible changes in car prices, he said, “Ask the relevant officials.” When he was pressed by a reporter who said “you are one of the related officials,” he responded by saying, “Ask the official who will come [in my place].”

On Saturday, local Persian economic daily Donya-e- Eqtesad reported that Salehinia has been removed from his post as deputy minister and was replaced by Farshad Moghimi. According to the sister publication of the Financial Tribune, as a sign of Salehinia’s fall from grace, he has been appointed as head of the Industries Ministry’s office for small and medium-sized enterprises.

Different Narratives

“As the Industries Minister Reza Rahmani announced earlier, a [newly established] council has been appointed to set car prices. The council will convene on Saturday or Sunday…The final decision about new car prices will be made and the minister himself or one of his deputies will inform the people about the changes,” Salehinia was quoted as saying.

On Oct. 31, the new Industry Minister Reza Rahmani told IRNA, “Automakers are not allowed to change car prices [on their own]. There is a particular legal mechanism for setting car prices. No decision has been made yet about changing car prices… A special council has been established in coordination with industry executives to study the problems of auto production sector that over the past several months have disrupted the market.”

Salehinia added, “Automakers have delivered reports [at previous sessions of the council], detailing their increased overheads. If prices are not updated carmakers will incur losses.”

Iran Khodro and SAIPA have published their unaudited financial statements, according to which they have failed to break even with losses in six months to Sep. 23 respectively mounting to 21 trillion rials ($184 million) and 29 trillion rials ($208 million).

It merits mention that Rahmani has questioned the credibility of the unaudited financial statements of the two main car companies on more occasions than one. “Iranian automakers are not loss-making. By producing certain models they may incur losses. However, this is not an issue that cannot be resolved by better resource management.”

During the first half of the current fiscal that started in March, Iranian automotive companies reported a 15.1% year-on-year decline in production with output dropping to 582,747cars and commercial vehicles from 686,687 units a year earlier.

Production rates of Iran Khodro and SAIPA also fell sharply by 23.1% and 10.7% respectively compared to the same period last year. Most private auto companies, with the exception of Kerman Motor, have also been on a slippery slope with outputs in the descending order.

Reliance on Imports

In the talk with IRNA Salehinia said, automakers have drawn up plans to raise prices based on the imported part content in their cars.

Domestic companies produce a wide range of models like the Pride and Samand that have been churned out for decades. There also are cars made from completely knocked-down (CKD) kits, largely from China.

Due to the new US sanctions carmakers iin Iran will no longer be able to offer several models they assembled from CKDs in the past.

Salehinia has said both the Consumer and Producer Protection Organization (CPPO) and the Competition Council will have a say in the new car prices.