Iran Bans Auto Presales

EghtesadOnline: Iranian carmakers have been barred from holding presales until they meet their overdue commitments and deliver orders placed earlier by customers, a deputy industries minister says.

News ID: ۷۴۷۴۳۶

28 May 2019

Abbas Tabesh, who also heads Iran Consumer and Producer Protection Organization, also told ISNA, “Iranian carmakers have been prohibited from introducing new presale schemes until they deliver cars that were sold months ago.”

Over the past 12 months, the car production rate has been on a downward trajectory in Iran, as the output of major manufacturers, Iran Khodro (IKCO) and SAIPA, continues to plunge.

The sharp decline in supply has derailed the market. In a push to bring some calm to the chaotic market, with support from the government of President Hassan Rouhani, IKCO and SAIPA introduced extended presales through which they registered orders for over 1 million orders with advance payments, Financial Tribune reported.

However, they have not been able to deliver because of plummeting production.

Since the US reimposed sanctions against Tehran, the Iranian economy has tanked, with the national currency, rial, weakening to all-time lows several times. On Monday morning, the USD was trading at 14,250 rials in Tehran, which would not have fetched more than 42,000 last spring.

Amid economic tensions fueled by an inflation rate unseen in recent memory, Iranians have been converting their savings into hard currencies and safe haven assets, including gold coins and cars.

The soaring demand for cars has pushed prices to unprecedented highs. For instance, the cheapest vehicle in Iran’s market, SAIPA’s Pride, is changing hands for 500 million rials ($3,500). The same model was sold for 200 million rials ($1,400) a year earlier.

Hard-Pressed Industry

Following the reimposition of sanctions against Tehran last summer, ties between Iranian car companies and international auto part suppliers were disrupted.

Almost all partners of local carmakers suspended their Iran operations. Some of the automotive firms that withdrew from the Iranian market are Renault, Peugeot, Citroen, Volvo, Daimler and Hyundai.

With sanctions taking a toll on Iran’s international banking relations, local car companies can hardly purchase parts from smaller market players and intermediaries.

All these have led to a sharp fall in car output and a piling up of unfinished cars in warehouses for lack of parts.

According to Tabesh, “Over 80,000 unfinished cars are gathering dust in the car companies’ warehouses.”

While the government has mostly focused on helping the auto industry out, car buyers have criticized firms for indulging in various malpractices.

Tabesh said Tazirat Organization is investigating numerous complaints against local car companies with customers accusing them of overcharging and spreading market hype.

Tazirat is a judiciary-affiliated entity that monitors trading crimes.

Declining Output

The latest data of Iranian automotive companies show their output plummeted to new lows in the first month of the current Iranian year (started March 21).

Industries Ministry’s data indicate that Iran produced 40,602 cars and 2,021 commercial vehicles in the month, registering a 47.2% decline compared with a combined output of 80,794 units in the corresponding month of the year before.

During the month, car production plummeted 47.1% from last year’s 76,807 cars.

Commercial vehicle production also registered a 49.3% year-on-year decline, as the number of trucks, buses, minibuses and pickups fell significantly from the previous year’s 3,987 units.

In the last fiscal year (ended March 20, 2019), a total of 955,923 cars and commercial vehicles were produced in Iran, indicating a 37.8% year-on-year decline.