Iran Auto Output Rises 4.3%

EghtesadOnline: Iran’s automotive output increased by 4.3% during the first four months of the current Iranian year (March 20-July 20) compared with the year-ago period.

News ID: ۷۵۰۵۷۵

30 July 2020

According to data released by Securities and Exchange Organization on Codal.ir, Iran Khodro (IKCO), SAIPA and Pars Khodro, Iran’s three major automakers produced 263,527 sedans during the four-month period, which figure was 252,588 last year.

IKCO’s output during the period rose to 132,324, which is 34.2% higher than last year’s corresponding time when the company produced 98,573 passenger vehicles.

In addition, IKCO manufactures commercial vehicles, such as pickups, vans, trucks and buses. The number of pickups produced by the company was 1,345. However, during the period under review, IKCO halted the production lines of several models of commercial vehicles.

SAIPA, IKCO’s competitor, produced 117,804 vehicles in the four months, marking a 3.8% year-on-year decline.

A subsidiary of SAIPA, Pars Khodro also registered a significant fall in production during the period. The company’s output reached 13,397, marking a 57.3% decline.

Monthly comparisons, however, show that the production rate in all three companies has seen a rise.

During the last month (June 20-July 20), IKCO’s production rate hit 35,836, marking a 22.9% growth compared to the year-ago month.

SAIPA’s output in the month was 38,284 vehicles, 26% higher than the same period of last year.

Pars Khodro last month produced 9,963 cars, registering a 44% growth compared to the year-ago month.

Due to consecutive declines since May 2019, analysts were in the dark, because the ministry stopped releasing auto production data. The figures have been 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.

The automakers 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 on the pretext of saving thousands of jobs at risk in the chronically dysfunctional automotive companies.

Shrinking Options

The types of cars available to Iranian customers have declined after the US reimposed harsh sanctions against Iran in the summer of 2018.

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 halted sales to Iranian firms, as the US embargo threatened Iran’s access to US 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 Iran Khodro Company.

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 key parts.

SAIPA, the other major automaker in Iran, also used to make several models in collaboration with China’s Brilliance Auto Group and South Korea’s Kia, the production of which has stopped.

Pars Khodro has halted the production lines of Renault Sandero and Logan.

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.

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.

The Industries Ministry has imposed hefty tariffs on car imports and domestic automakers charge exorbitant prices for their substandard products from presales.

Buckling under the burden of US sanctions, Iran’s auto production was plummeting since June 2018 until recently.

Recently, Mohammad Reza Najafimanesh, a member of Tehran’s Chamber of Commerce and an avid supporter of domestic carmakers, 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 ($304.2 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’ debts to parts makers. These debts have not been mitigated by the regular price hikes.

As long as the Iranian automotive sector lacks accountability and depends on state financial assistance, it will continue to earn the wrath of the general public because of their costly and substandard vehicles.