Iran Auto Output Down 32%

EghtesadOnline: Iran’s automotive output fell by 32.3% during the eight months ending Nov. 21 compared to a year earlier.

News ID: ۷۴۹۱۵۵

10 December 2019

According to data announced by the Persian economic daily Donya-e-Eqtesad, Iran produced 487,096 passenger cars during the period.

Previously, the Industries Ministry regularly published statistics about car production. However, following consecutive declines, the ministry stopped the practice, Financial Tribune reported.

The following data are extracted from the financial statements submitted by automakers to Tehran Stock Exchange:

The number of passenger vehicles produced during the period was 445,774, 32.8% lower than the figure registered in the corresponding period of last year.

The production of passenger vans, minibuses, buses and commercial vehicles respectively saw a decline of 87.4%, 67.8%, 43.1% and 76.3% all.

The sharp pressure of US sanctions, heightened by pervasive mismanagement and corruption, has 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 of their managers.

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

Glaring Disarray

Iran Khodro’s production dropped 35.8% in the eight-month period to reach 202,695 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.

In addition, IKCO produced 20,588 passenger vehicles during the month ending Nov. 21, which is 12.4% fewer compared to its output in the year-ago month.

IKCO’s competitor, SAIPA, is also in disarray, as it produced 259,362 vehicles in the eight-month period, marking a decline of 17.2% year-on-year.

However, SAIPA produced 30,495 passenger vehicles in the month ending Nov. 21, which shows a 20.7% growth compared with the same month of last year.

Shrinking 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 payments for the goods and services could not 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 is 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 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 then, 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.