Iran Auto Output: All That Clamor for Naught

EghtesadOnline: After local media frenzy over the official launch of the production line of Peugeot 2008 by Iran Khodro, data released by the Ministry of Industries, Mining and Trade indicate that during the first two months of the current calendar year (started March 20) only four units of the model were produced.

News ID: ۷۷۶۸۷۳

10 June 2017

President Hassan Rouhani officially launched the production line of Peugeot 2008 on April 27, and IKCO officials present at the event had stated that the company is set to annually produce 30,000 units of the model.

Furthermore, the car, priced at $16,500 in the international markets will be sold for 900 million to 1 billion rials ($24,000 to $26,600) in Iran — depending on the options offered. Earlier, local media outlets quoted IKCO chief Hashem Yekkezare as putting the vehicle’s price at around 750 million rials ($20,000).

Low Quality Cars Dominant

The ministry has also reported auto output numbers that indicate local automakers produced 172,033 cars plus light and heavy duty vehicles during the two months, Financial Tribune reported.

According to the statistics, cars had a 94% share in the overall domestic production with 162,516 units.

It is reported that three models are dominant having 55% share. IKCO and SAIPA, the two main carmakers, produced 87,282 units of the three models during the period.

The three models, which hardly made a single star in the latest ranking by Iran Standard and Quality Inspection Company (ISQI), are Peugeot 405, 25-year-old Kia Pride model and the locally designed Samand.

This is while the head of ISQI Nayereh Piroozbakht, recently issued an ultimatum to the car companies to improve quality or face consequences. “Production of vehicles which fail to comply with the 83 automotive standards will be halted by the end of 2018,” she warned.

The automakers have so far refused to budge and have done nothing to upgrade or suspend the production of poor quality cars. However the reported statistics indicate decrease in the companies’ output of the models notorious for poor quality, mileage and safety.

The cars produced by the two companies have engines that are no more in use in most countries with strict environmental regulations.

IKCO

Iran’s largest automaker Iran Khodro was able to increase by 8.7% its total output during the two months compared to the same period in the previous year.

However, IKCO has seen a dramatic decline in production of pickup trucks and heavy duty vehicles with the two respectively recording 64% and 96.2% y/y fall.

Having a 53% share of the industry, the company produced 86,473 cars during the period. IKCO’s low quality cars, namely Samand and Peugeot 405 still have a 44% share in the company’s production rate. During the same period last year, the two models had a 58% share of the company’s output.

Furthermore, IKCO has decreased the production of its Peugeot 405 and Samand. The company produced 38,414 units of the two models during the period, indicating a 14% y/y fall.

The ministry report also said that a production plant in central Semnan Province — officially launched in April by President Rouhani has so far produced 507 units.

The production plant Farda (tomorrow in Persian) built at a cost of 10 trillion rials ($266 million) by an unidentified private investor, is listed as an IKCO asset. The factory is producing the Samand models.

SAIPA

This company, the second largest automaker, recorded 1.5% y/y growth in its production rate in the two months with the number reaching 57,721 units.

Furthermore, the company has decreased the production rate of its outdated substandard Pride. SAIPA produced 10,862 Prides during the period, 22.2% less compared to the same period last year.

It’s not clear whether the move is SAIPA’s response to widespread calls for shutting down the production line of the obsolete and inferior model.

Other Classes

Two other sectors were also in negative territory. According to the report, during the two-month period, local firms produced 7,667 pickup trucks and 1,476 heavy duty vehicles which respectively indicate 33.9% and 5.4% decline.

After cars, the largest share of automotive output is related to pickup trucks with 4.4% share of the industry.

Pickup trucks are followed by heavy duty vehicles which have a meager share of less than 1% with 1,476 units produced during the period.