Iran H1 Auto Output Dips Near 35%

EghtesadOnline: Iran’s automotive output declined by 34.8% during the first half of the fiscal 2018-19 compared to a year earlier.

News ID: ۷۴۸۷۷۷

22 October 2019

According to data published by Fars News Agency in the six months to Sept. 22, Iran produced 377,517 cars and commercial vehicles, indicating a 34.8% decline on year.

During the period, 348,268 passenger vehicles were made in Iran, down 35.9% year-on-year.

Production of vans, minibuses and buses plummeted 85.7%, 65.9% and 35.9% respectively compared to a year earlier, according to Financial Tribune.

Iran’s truck output dropped 79.9% YOY in the period.

Previously, the Industries Ministry regularly published statistics about car production. However, following consecutive declines, the ministry stopped publishing such reports. The release of the data by Fars News Agency comes as a surprise to observers.

Mismanagement and corruption, as well as the blistering pressure of US sanctions, have derailed Iran’s auto industries. The semi-state car companies, SAIPA and Iran Khodro, have struggled with numerous scandals over the past few months, including the arrest of several managers of the two companies.

Industry insiders and local media have speculated that the two companies are on the verge of bankruptcy and, as usual, need the government to help bail them out to preserve thousands of jobs at stake in the chronically dysfunctional automotive firms.

IKCO, SAIPA

Iran Khodro’s output plummeted 36.7% in the six-month period to reach 159,497 units. In addition to passenger vehicles, IKCO manufactures commercial vehicles, including vans, pickups, trucks and buses. However, in the period, IKCO halted the production lines of commercial vehicles.

IKCO’s archrival, SAIPA, is also in disarray. In the period under review, SAIPA produced 200,011 cars and commercial vehicles, marking a decline of 20.7% year-on-year. The company produced 176,893 passenger vehicles.

According to the report during the month ending Sept. 22, Iran auto industries showed little signs of recovery with SAIPA recording a 48.6% jump in its monthly output. However, IKCO’s production rate during the month slid 9.7% compared to a year earlier.

Previously, Industries Minister Reza Rahmani has been criticized by Fars News Agency for making false promises that auto production has been boosted over the past few months.

Shrinking Choice

The choice of cars available to Iranian customers has shrunk over the past year after the US reimposed harsh sanctions against Tehran.

Almost all foreign partners of Iranian carmakers pulled out of the country after US sanctions targeted Iran’s automotive industries.

Even international auto parts makers with decades-old ties with Iran halted sales to Iranian firms, as the US embargo threatened the former’s access to American markets and disrupted the latter’s global banking relations.

As a result, even if a foreign firm wanted to work with domestic companies, Iranian payment for the goods and services couldn’t get through.

All these have taken a harsh toll on Iran’s auto manufacturers and assemblers.

As a result, the production of 20 car models has been halted over the past year. Some of the cars, which were largely assembled in Iran, such as Renault’s Sandero and Sandero Stepway, as well as Suzuki’s Grand Vitara, stopped rolling out of IKCO.

IKCO also makes several Chinese Haima and Dongfeng models. The company is yet to announce whether it be able to sustain the production of these models. Industry insiders say their production rates have been declining rapidly.

The firm also makes several Peugeot models, including 405, 206 and 2008. Reportedly, IKCO will be able to sustain the production of 206 and 405 since it has been making them for decades and only relies on the foreign supplier for some of the key parts. However, the CKD production of 2008 will most likely end.

Iranian car company SAIPA also used to make several models in collaboration with China’s Brilliance Auto and South Korea’s Kia. The production of these cars has been halted.

SAIPA subsidiary Pars Khodro also used to make Renault Sandero and Logan. The production lines of these cars have also stopped.

South Korea’s Hyundai Motor also had a deal with Iranian private carmaker Kerman Motor to produce Hyundai i10 and i20 in Iran, which partnership has been suspended.

Several other Chinese brands were assembled by private Iranian automakers. BYD, Great Wall, MG and Lifan have totally stopped their production activities in Iran.

Poor Performance

Despite an automotive background of nearly six decades and a four-decade-long history of auto management since the 1979 victory of the Islamic Revolution, the sector has remained under state control and failed to stand on its own feet.

The highly monopolized sector, which has prevented the entry of affordable imports, is chronically bankrupt, despite extracting exorbitant prices for its substandard products from presales.

Since June 2018, Iran’s auto production has been plummeting.

Data released by the Industries Ministry show that the decline has continued in the second month of the current fiscal year (ended May 21). Since past four months, the ministry has stopped releasing auto production stats, leaving analysts in the dark.

Iranian carmakers produced 87,821 cars and commercial vehicles in the month ending May 21, registering a 16.1% decline compared with a combined output of 104,684 units in the corresponding month of the year before.

According to the old data, car production dropped 17.3% compared to the previous year to reach 81,418 units.

Iranian firms manufactured 185,478 cars and commercial vehicles during the first two months of the last fiscal year, which figure plummeted to 140,917 this year.

As long as the Iranian automotive sector lacks an efficient strategy and accountability, it will remain in a tunnel without any ray of hope.