Iran H1 Auto Output Rises 10%

EghtesadOnline: Iran’s automotive output increased by more than 10% during the first half of the current Iranian year (March 20-Sept. 21) compared with the year-ago period.

News ID: ۷۵۱۱۹۹

06 October 2020

According to data released by Securities and Exchange Organization on Codal.ir, Iran Khodro (IKCO) and SAIPA, Iran’s major automakers produced 405,893 sedans during the six-month period, of which IKCO had the lion’s share of 208,030 vehicles, up 40% year-on-year.

IKCO also manufactures commercial vehicles, such as pickups, vans, trucks and buses. However, no statistical report has been released in this category.

SAIPA, IKCO’s competitor, produced 150,417 vehicles in the four months, marking a 12% decline compared to the year-ago month.

Pars Khodro, a subsidiary of SAIPA, also registered a slight fall in production during the period. The company’s output reached 47,446, marking a 1.3% decline.

Monthly comparisons, however, show that the production rate in all three companies has seen a rise. During the month ending Sept. 21, the three automakers manufactured a total of 70,582 sedans, 17% higher than the previous month.

In the last Iranian month (Aug. 22-Sept. 21), IKCO’s production rate hit 41,175, marking a 15% growth compared to the previous month.

SAIPA’s output in the month was 23,432 vehicles, 20% higher than in the preceding month.

In addition, Pars Khodro recorded a 123% growth in the sixth month, producing 10,182 vehicles.

Industry insiders estimate that the production of domestic automakers will reach 1 million units.

According to Saeed Zarandi, a deputy industries minister, automakers plan to produce up to 1.2 million vehicles by the current Iranian yearend (March 2021).

Last Iranian year (ended March 19, 2020), domestic automakers produced a total of 927,197 vehicles, 855,000 of which were passenger cars.

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.

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.

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.

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 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 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, the third main carmaker, has halted the production lines of Renault Sandero and Logan.

South Korea’s Hyundai Motor had partnered with Iranian private carmaker Kerman Motor to produce Hyundai i10 and i20 in Iran, which deal has been suspended.

Several other Chinese brands were assembled by private Iranian automakers, such as BYD, Great Wall, MG and Lifan, the production of which has stopped entirely in Iran.

Bleak Future

Iran’s auto sector was inefficient and ailing even before US President Donald Trump reimposed economic sanctions in 2018 after pulling out of Iran’s historic nuclear deal.

As expected, the US penalties gradually obstructed the supply of raw materials and auto parts on a massive scale. Foreign carmakers and parts suppliers walked away from the lucrative market fearing Washington’s ire.

Multifarious solutions have been proposed by authorities to minimize the negative impact of the US president’s open animosity and economic war against Iran’s major industries.

The proposals have produced nothing worthwhile, while car prices have continued to soar.

The Industries Ministry is in charge of regulating the loss-making car manufacturing industry. Over the decades, the ministry’s thick ties with the undeserving sector and vested interests of some state actors have impeded efforts for undertaking effective reforms.

Corruption scandals involving hundreds of millions of dollars have further tarnished the auto sector’s public image. The scandals have made economic experts and informed observers wonder whether the paralyzed industry has a future.

As part of the ministry’s agenda to revitalize the monopolized sector, localization of parts and technologies has been prioritized by the government and carmakers. This flies in the face of permits issued for importing such trivial auto parts like mudguards.

In a 2018 report, reviewing data from the Islamic Republic of Iran Customs Administration, the Financial Tribune revealed that such permits had been issued for years. Such data are no longer accessible and it could not be ascertained whether the practice is continuing.