Auto Output Surges by 13%

EghtesadOnline: Iran’s automotive output increased by 13% during the first seven months of the current Iranian year (March 20-Oct. 21) compared with the year-ago period.

News ID: ۷۵۱۴۲۹

08 November 2020

According to data released by Securities and Exchange Organization on Codal.ir, Iran’s major automakers, Iran Khodro (IKCO) and SAIPA, produced 496,876 sedans during the seven months.

IKCO’s output during the period rose to 250,330, which is 38.6% higher year-on-year when the company produced 153,702 passenger vehicles.

In addition, IKCO manufactures commercial vehicles, such as pickups, vans, trucks and buses, the stats of which have not been announced.

SAIPA produced 188,271 vehicles in the seven months, marking an 8.1% year-on-year decline.

Pars Khodro, a subsidiary of SAIPA, registered a 6.5% increase during the period by producing 58,275 vehicles.

Monthly comparisons, however, show that the total production rate of the three companies has declined. During the seventh month (Sept. 22-Oct. 21), auto output reached 69,052 to mark a 10% decline compared to the previous month.

IKCO’s production rate hit 38,680 during the month, marking a 6% decline compared to the sixth month. SAIPA’s output was 21,556 vehicles, 9% less than the previous month.

Pars Khodro last month produced 8,816 cars, registering a 13.5% fall compared to the previous month.

Mismanagement, corruption and the pressure of US sanctions, now coupled with the Covid-19 outbreak, have derailed Iran’s auto industries.

Industry insiders and local media have speculated that the two companies perpetually remain on the verge of bankruptcy and, as usual, constantly beseech the government to help bail them out 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 other 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 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.

Unwelcoming 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.

Various solutions have been proposed by officials to minimize the negative impact of the US president’s open animosity and economic war against Iranian 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, data from the Islamic Republic of Iran Customs Administration 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.