Carmakers’ Losses Exceed $830 Million in Six Months

EghtesadOnline: Iranian car companies have incurred losses to the tune of 100 trillion rials ($833.2 million) in the first half of the current fiscal year (started March 21), secretary of Iran Vehicle Makers Association says.

News ID: ۷۴۹۰۱۷

24 November 2019

Ahmad Nematbakhsh also told local automotive website Asbe Bokhar: “According to data published by Iran’s Securities and Exchange Organization, the carmakers were burdened with 70-80 billion rials [$583,000-666,600] of losses last year [ended March 2019].”

According to the official, the status of car companies has further deteriorated over the past few months, recalling that the country’s largest carmakers Iran Khodro (IKCO) and SAIPA have incurred losses worth 50 trillion rials ($416.6 million) each.

He blames the government for the chaotic state of car production. He believes that if the state authorities had allowed car prices to increase, the firms would not have been saddled with such gargantuan losses, according to Financial Tribune.

This is while both firms have been allowed to jack up car prices on several occasions. However, seemingly the carmakers’ thirst for price hikes is insatiable.

Car prices have seen steep rises since last summer. For instance, the cheapest vehicle in the market, the Pride—a small city car made by SAIPA—is now sold for 480 million rials ($4,000). The same car hardly fetched 220 million rials ($1,830) a year ago.

After the US reimposed sanctions last year, Iran’s car industry took a big hit as output fell, spare parts were in short supply and thousands of jobs were lost, particularly in the struggling car parts industry.

Carmakers and their minions love to blame the sanctions for their worsening problems that, indeed, have been around for decades. However, independent observers and car buyers often point to the inherent mismanagement, nepotism and chronic corruption in the seemingly lucrative industry, as the carmakers themselves have made a bad situation worse.

Iran’s automotive output suffered its sharpest year-on-year decline in 2018 since the 21st century.

Local companies last year produced 1.34 million cars and commercial vehicles to register a 40% YOY decline, data published on the Organisation Internationale des Constructeurs d’Automobiles’ website (OICA.net) show.

The sector had a bad year in 2012 when local car output dropped 39%. However, 2018 was the worst year for the key auto industry in recent memory. Most market observers and analysts worry that 2019 will be worse.

In the past decade, 2003 was the worst year for the sector in terms of production rates when 743,680 vehicles were made.

Iran’s worldwide ranking in terms of the number of vehicles produced has declined. Currently, the country is the 17th largest carmaker in the world. In 2017, it was 16th.

In the past year, 851,000 cars and 491,000 commercial vehicles were made in the country. In 2017, auto output stood above 1.5 million units.

In the past year, over 91.5 million cars and commercial vehicles were manufactured in the world, showing a 6.29% YOY decline. Iran has a 1.47% share in global auto production.

The leading countries in terms of production in that year were China with 25.7 million units, the US (10.9 million), Japan (9.2 million) and Germany (5.1 million).