Iran Auto Output Down 25%

EghtesadOnline: Iran’s automotive output fell by 24.8% during the ninth months ending Dec. 21 compared to a year earlier.

News ID: ۷۴۹۳۷۰

05 January 2020

According to data published by Fars News Agency, Iran produced 572,965 vehicles of different models during the period.

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

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

The number of passenger vehicles produced during the period was 524,167, 26.3% lower than the year-ago time.

Besides, the production of passenger vans, minibuses, buses, and commercial vehicles respectively saw a decline of 86.2%, 54.6%, 28.4% and 73.7%.

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 on charges of implementing an unauthorized price hike and committing fraud.

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

Iran Khodro’s production dropped 27.6% in the nine-month period to reach 243,351 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 39,404 passenger vehicles during the month ending Dec. 21, which is 103.4% higher compared to its output in the year-ago month.

IKCO’s competitor, SAIPA, is also in disarray, as it produced 300,106 vehicles in the nine-month period, marking a decline of 8.7% year-on-year.

However, SAIPA produced 35,631 passenger vehicles in the month ending Dec. 21, which shows a 162.9% growth compared to the same month of last year.

Limited Alternatives

The types of cars available to Iranian customers have declined over the past one 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 international 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 produces several Chinese Haima and Dongfeng models, but the company is yet to announce whether it would be able to sustain the production of these models.

The Iranian firm also produces several Peugeot models, including 405, 206 and 2008. Reportedly, IKCO will be able to continue 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 the 2008 model 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.

Despite the Industries Ministry’s hefty tariffs on foreign car imports and the exorbitant prices charged by domestic automakers for their substandard products from presales, Iran’s highly monopolized automotive sector is chronically bankrupt.

Buckling under the burden of US sanctions, Iran’s auto production has been plummeting since June 2018.

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.