Iran Auto Output Up 4% in 10 Months

EghtesadOnline: Iran’s automotive output increased by 4% during the 10 months ending Feb. 19 compared to a year earlier.

News ID: ۷۴۹۷۷۷

01 March 2020

According to data published by the Persian economic daily Donya-e-Eqtesad, Iran produced 786,347 passenger vehicles of different models during the period, which is 29,478 more than the year-ago months, Financial Tribune reported.

No data have been released on the production rate of commercial vehicles and buses.

From a detailed viewpoint, Iran Khodro’s (IKCO) production raised 2.2% in the 11-month period to reach 354,982 units. The figure was 7,734 higher than in the same period of last year.

Besides passenger vehicles, IKCO manufactures commercial vehicles, including vans, pickups, trucks and buses. However, during the period under review, IKCO halted the production lines of several models of commercial vehicles.

SAIPA, IKCO’s competitor, produced 335,000 vehicles in the nine-month period, marking an increase of 17.8% year-on-year, which amounts to 50,609 more cars.

Pars Khodro, on the contrary, registered a 23% decline, producing 96,362 vehicles. Last year, the company produced 125,227 vehicles.

Month-on-month comparisons, however, show that the production rate in all three companies has declined.

IKCO produced 45,145 passenger vehicles in the month ending Feb. 19, registering a 12.5% decrease compared to the previous month.

SAIPA’s output reached 29,188 vehicles, 22% less than the month before.

Pars Khodro also recorded a 14.7% fall compared to the previous month, producing 86,084 passenger vehicles.

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

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

Mismanagement and corruption, plus the sharp pressure of US sanctions, have derailed Iran’s auto industries. The semi-state car companies, SAIPA and 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.

Limited Choices

The types of cars available to Iranian customers have declined over the past one year after the US reimposed harsh sanctions against Iran.

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 could not get through. All these have taken a harsh toll on Iran’s auto producers and assemblers.

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

IKCO also produces 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 and 206. 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.

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.

Although the Industries Ministry’s hefty tariffs on car imports and 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, 2019). 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.