Iran Gov’t Moves to Regulate Distribution Network

EghtesadOnline: Eager to contain the mounting public outrage over the recent car price hikes, the hard-pressed Industries Ministry has decided to shift the focus to aggravating factors closer to home, especially the distribution network.

News ID: ۷۸۳۹۰۷

04 September 2018

For years the auto market has suffered from the presence of dealers who purchase vehicles at factory prices and sell to the public on the free market at much higher rates.

Amid the manifold factors contributing to the current exorbitant prices from the reimposition of US sanctions, the plummeting value of the rial, defective government import and industrial policies, dealer’s meddling in the market and the jump in prices of raw materials, the only long-ignored and controllable aspect seems to be the dealers’ role in bottlenecking the supply of factory-priced vehicles to the public.

Talking to Asre Khodro, Industries Minister Mohammad Shariatmadari in broad terms discussed car prices, pointing to the rising tide of liquidity as the reason for the volatility in various markets, including forex, gold and auto markets, Financial Tribune reported.

Shariatmadari said they have held many meetings with authorities and market experts to restore stability to the auto market, and one of the most practical solutions they have come up with has been to collaborate with car distributors active in the private sector.

Supply Chain

Shariatmadari said they have had productive meetings with car manufacturers and some of the major distributors from the private sector across the country, noting, “We have asked them [distributors] to play a more active role in car production and broker business partnerships with car manufacturers.”

The minister added that when it comes to selling cars, they are taking preventive actions that can curb the influence of dealers on the volatile market.

Shariatmadari said, “We will allow the purchase of one vehicle for each Identification Number and specific IP, so as to put a stop to bulk buying.”

The measure is hoped to deter bulk buyers, who are purchasing vehicles en masse to make a fast buck to hedge against the galloping inflation,.

The minister said they have drawn up 10 to 15 workable solutions to address the headwinds Iran auto industry is facing, adding that market insiders will be notified of the solutions to apply them in their businesses. He did not elaborate further.

To conclude his remarks, Shariatmadari advocated a micromanagement approach to the sector that will monitor distribution all the way until real buyers receive their purchased vehicles.

Imports Ban

Another factor contributing to the current high prices is the ban on imported vehicles, which was imposed as a way to save the foreign currency reserves of the country from depletion.

After the US administration decided to go back on its earlier decision to sign the 2015 Iran nuclear deal, the USD rate hit unprecedented highs in Tehran and prompted the government of President Hassan Rouhani to ban the import of non-essential goods into the country, including vehicles.

Deputy Industries Minister Mansour Moazemi now says that car imports need to be managed, not prohibited.

Talking to Eqtesad Khodro, Moazemi said, “The ban on car imports was not necessary. We can manage car imports in a way to avoid volatility in the market.”

Business insiders are of the opinion that the ban on car imports can, in fact, discourage foreign car companies such as Renault to preserve ties with Iran.

US President Donald Trump’s withdrawal from the nuclear deal prompted European companies, which since 2015 had begun to invest in Iran’s auto industry, to pull the plug on their activities in the country.

Moazemi reiterated that Renault and Peugeot have not left Iran, but they have merely suspended operations.

He added, “Iran is a guaranteed and safe market for the French automakers, therefore, these companies will never leave the country.”

The deputy minister also said that by enforcing a ban on all car imports, foreign companies might find the measure off-putting and called for the ban to be revised.