Iran Auto Market: Car Prices Double!

EghtesadOnline: Iran Consumer and Producer Protection Organization (CPPO) and local automotive companies have reached an agreement to jack up factory prices between 50-130%.

News ID: ۷۴۶۳۴۴

18 December 2018

After a long fracas, the CPPO and major carmakers Iran Khodro and SAIPA, have reached an agreement that says  car prices at the factory that currently cost under 450 million rials ($4,360) will jump between 50-130%, informed sources told the Persian-language economic newspaper Donya-e-Eqtesad,  a sister publication of the Financial Tribune.

According to prices introduced by the Industries Ministry, cars made or assembled inside the country are categorized into two price groups: under 450 million rials ($4,360) and above.

Prices of cars under the 450-million-rial threshold will be set by a government task force led by the CPPO, and another state body, the Market Regulatory Authority, an ad hoc committee, created to check inflation and price gauging, Financial Tribune reported.

For the rest of the vehicles, companies are now allowed by the government to set factory prices 5% lower than the market price --  a move that has created much rancor among the common people and those that had been planning to  buy a new (or second-hand) car.

The new factory prices have been sent to the Market Regulatory Authority for final approval and the higher prices will be made public in the coming days.

If the MRA agrees to the new prices, the cheapest car in Iran (SAIPA’s Pride) would cost 345 million rials ($3,350).

State Support

On Sunday, the Industries Minister Reza Rahmani told  the state-owned broadcaster, “Output of domestic car companies has fallen due to lack of funds. In talks with First Vice President Es'haq Jahangiri it was decided that we address this issue.”

During the first half of the current fiscal which started in March, local automotive companies produced 582,747 cars and commercial vehicles -- a 15.1% year-on-year decline.

Seemingly the steep price increases are part and parcel of the government policy to “address the issue” and protect the dysfunctional local car-making industry notorious for low quality and high prices.

Rahmani repeated his earlier stance about the new factory prices that were above 450 million rials.  “Companies have been allowed by the government to set factory prices 5% lower than the market price.”

Later, deputy industries minister Farshad Moghimi told Fars News Agency that the government is poised to introduce “a package for preserving the auto industry.”

The package will include forex allocation for auto parts imports and other financial support.

IKCO  First

Taking the lead, IKCO is the first company to introduce new prices. Last week, the company increased factory prices of three models including vehicles based on Peugeot 405 and Renault Logan.

The company raised the price of a face-lifted version of Peugeot 405 with automatic gearbox, locally known as Peugeot Pars, from 540 million rials ($5,250) to 83 million rials ($8,050), a whopping 54% increase.

Factory price of a pickup based on Renault Logan, called Tondar in Iran almost doubled reaching 770 million rials ($6,870) from 390 million rials ($3,480).

The state-affiliated firm also increased the price of the Chinese-derived pickup Arisan from 310 million rials ($2,760) to 360 million rials ($3,220).