Iran Auto Output Down 22%

EghtesadOnline: Iran’s automotive output fell by 22.4% during the seven months ending Oct. 22 compared to a year earlier.

News ID: ۷۴۸۸۹۹

10 November 2019

According to data announced by the Persian economic daily Donya-e-Eqtesad, Iran produced 440,214 passenger cars during the period.

Previously, the Industries Ministry regularly published statistics about car production. However, following consecutive declines, the ministry stopped releasing such reports.

The current data are extracted from the financial statements submitted by automakers to the domestic stock exchange, according to Financial Tribune.

The report contains no details about the number of commercial vehicles produced.

Mismanagement and corruption, plus the sharp pressure of US sanctions, have derailed Iran’s auto industries. The semi-state car companies, SAIPA and Iran Khodro (IKCO), 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 save thousands of jobs at risk in the chronically dysfunctional automotive companies.

IKCO, SAIPA, Pars Khodro

Iran Khodro’s production dropped 30% in the seven-month period to reach 180,680 units. Besides passenger vehicles, IKCO manufactures commercial vehicles, including vans, pickups, trucks and buses. However, in the period under review, IKCO halted the production lines of several models of commercial vehicles.

However, the output of IKCO compared to a month earlier shows a 12.5% increase, accounting for 24,398 vehicles.

IKCO’s competitor, SAIPA, is also in disarray, as it produced 204,819 passenger vehicles, marking a decline of 4.4% year-on-year.

SAIPA produced 25,006 passenger vehicles in the month ending Oct. 22, which shows a 25.3% decline compared to the preceding month.

SAIPA’s subsidiary Pars Khodro produced 54,715 vehicles, down 43% compared to the same period of last year. With an output of 6,648 vehicles in the month ending Oct. 22, the automaker experienced a 25.5% decrease compared to a month earlier.

Limited Choices

The types of cars available to Iranian customers have declined over the previous 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 wished 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 producers 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 Iranian firm also produces 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 Group and South Korea’s Kia. The production of these cars has stopped.

Pars Khodro, which used to make Renault Sandero and Logan, has halted their production lines.

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, such as BYD, Great Wall, MG and Lifan, which have entirely stopped their production activities in Iran.

Weak 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 hampered the entry of affordable imports by imposing hefty tariffs, is chronically bankrupt, despite extracting exorbitant prices for its substandard products from presales.

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

Data issued by the Industries Ministry indicate that the slump has continued in the second month of the current fiscal year (ended May 21). Since past five months, analysts are in the dark as the ministry stopped releasing auto production data.

Iranian carmakers produced 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 dependent on the kindness of state officials and continue to earn the wrath of the general public.