Iran Government Removes Ban on Auto Presales

EghtesadOnline: While complaints against local automotive companies over delayed deliveries have piled up at the judiciary, the government has given the green light to these firms to launch new presales, albeit with a condition, a deputy industries minister says.

News ID: ۷۴۷۵۰۸

11 June 2019

Abbas Tabesh, who also heads Iran Consumer and Producer Protection Organization, told Mizan Online, “Car companies can register a new preorder in return for delivering one vehicle.”

Earlier last week, the official had told ISNA that carmakers have been barred from holding presales until they meet their overdue commitments and deliver cars that were sold months ago.

However, seemingly under pressure from the strong lobby of these state-affiliated carmakers, the authorities have been forced to abandon their earlier position and let car companies register more orders, according to Financial Tribune.

Support for the embattled auto industry is not limited to the government. In a talk with YJC, Mohammad Ali Esfanani, the head of Tehran branch of Tazirat Organization (a judiciary-affiliated oversight entity dealing with trading offenses), said , “Instead of penalizing car companies over delayed delivers, we are trying to help them meet their commitments.”

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 calm the troubled 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 vehicles with advance payments.

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

Tasnim News Agency reports that the country’s largest automotive companies, Iran Khodro and SAIPA, respectively have failed to deliver 140,000 and 160,000 cars, while informed sources put the collective number north of 500,000 units.

Since the US reimposed sanctions against Tehran, the Iranian economy has tanked, with the national currency, rial, weakening to all-time lows. On Monday morning, the USD was trading at 128,500 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 520 million rials ($4,040). The same model was sold for 200 million rials ($1,550) a year earlier.

Declining Output

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.

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.