Iran's Auto Output Down 14.6%

EghtesadOnline: Iran’s automotive output declined by 14.6% during the month ending May 20 compared to a year earlier.

News ID: ۷۵۰۱۳۰

31 May 2020

According to a report published by Iran’s Securities and Exchange Organization on Codal.ir, the semi-state Iranian automakers, Iran Khodro (IKCO) and SAIPA, produced 78,190 passenger vehicles during the month, which is 13,436 less than their output a year earlier.

IKCO’s output during the month dropped to 42,168, which is 20% lower than last year’s corresponding month when the company produced 53,083 passenger vehicles.

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.

IKCO did not release data on the production rate of commercial vehicles and buses.

SAIPA, IKCO’s competitor, produced 36,027 vehicles in the month, marking a significant decline of 6.5% year-on-year, which amounts to 2,516 fewer cars.

Month-on-month comparisons, however, show that the production rate in both companies has significantly risen.

Compared to the figures provided for the first month of the current year (ending April 19), IKCO’s production rate rose by 168.6%. The company’s output during the previous month was 15,694.

SAIPA’s output was only 7,304 vehicles, 393% lower than the latest stats.

Previously, the Industries Ministry regularly published car production data. 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, corruption and the pressure of US sanctions, now coupled with the Covid-19 outbreak, have derailed Iran’s auto industries.

SAIPA and IKCO have grappled 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.

Coronavirus Impact

The coronavirus has been reportedly spreading in Iran since February, which has economically affected all businesses.

First reported in China’s Wuhan Province in December 2019, the coronavirus has so far infected 6,034,667 people worldwide, claiming the lives of 366,896. The number of recovered cases has reached 2,661,257, according to a Reuters report on Saturday.

From an international viewpoint, giant auto production companies have released hard numbers showing a deep decline in automotive sales in the first quarter of 2020, as analysts expected.

Since February, stay-at-home orders and shutdowns swept over the world in response to the coronavirus outbreak and BMW, Audi, Chrysler Automobiles, Ford, General Motors, Honda, Hundai, Kia, Mazda, Mitsubishi and Nissan are only a number of companies that reported a 15-40% decline in sales during the Q1 compared to the year-ago period.

As the coronavirus outbreak continues to spread across the world, automakers are taking extreme measures such as plant closures. The situation remains fluid, as more European companies suspended work and US automakers extended lockdown periods. Therefore, their sales are expected to decline further in view of the unspecified end to the virus lockdown.

In Iran, the virus has so far claimed the lives of 7,677 people out of a total of 146,668 infected people.

According to Iran’s Health Ministry, 114,931 patients have so far recovered from the disease.

Only time will reveal how the already sanctioned and malfunctioning auto industry in Iran will handle the crisis, as it has not announced any work shutdown.

Poor 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 has imposed hefty tariffs on car imports and domestic automakers charge exorbitant prices 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 continued in the second month of the last fiscal year (ended May 21, 2019). Since then, analysts are in the dark, as the ministry stopped releasing auto production data.

Recently, Mohammad Reza Najafimanesh, a member of Tehran’s Chamber of Commerce, told reporters that Iranian automakers will miss output goals they had set for the current fiscal year (started March 20), amid the coronavirus pandemic and US sanctions.

Najafimanesh said IKCO and SAIPA’s debt to auto parts makers has reached 71.5 trillion rials ($403.9 million). He added that the country’s auto sector will only survive, if the government were to extend financial help.

Local news outlets have mentioned contradictory figures as car manufacturing companies’ debt to parts makers.

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 because of their costly and substandard vehicles.