Iran Khodro Joins the More Costly List

EghtesadOnline: Iran Khodro increased factory prices of three models at the weekend including vehicles based on Peugeot 405 and Renault Logan.

News ID: ۷۸۴۳۹۲

11 December 2018

The company raised the price of a face-lifted version of Peugeot 405 with automatic gearbox locally known as Peugeot Pars from 540 million rials ($4,820) to 83 million rials ($7,410), a whopping 54% increase, local automotive website Asbe Bokhar reported.

Factory price of a pickup model based on Renault Logan, called Tondar in Iran has been almost doubled reaching 770 million rials ($6,870) from 390 million rials ($3,480). The state-affiliated firm also increased the price of the Chinese-derived pickup Arisan from 310 million rials ($2,760) to 360 million rials ($3,220)

While experts say IKCO’s decision to jack up prices to such a large extent is illegal and unacceptable, the company has put out a press release claiming that the decision is fully in line with state regulations, according to Financial Tribune.

Informed sources say the dysfunctional and poorly managed car companies have received the green light from the government to increase prices. However, in a move aimed at gauging the response of the chaotic car market and consumers to the higher prices, the increases have been limited to a few models.

According to auto industry insiders, IKCO’s arch-rival and the second top carmaker SAIPA is closely  monitoring the response to the price hikes and will very likely follow in the footsteps of Iran Khodro sooner rather than later.

An unnamed official with the Ministry of Industries told  Tasnim news agency  “Car companies have got permission to set factory prices 5% lower than the market price. However, due to some considerations, the prices have been increased only for a few selected models.” He did not elaborate.

False Premise?

In response to the strange price hikes, a lawmaker from Shiraz, Bahram Parsaei, said in a tweet: “With the false pretext of supporting local production, the auto industry has pushed for a ban on car imports and the imposition of  outrageous tariffs” on the automotive import sector as a whole.

The apparently vexed MPs says, “They [the automakers] have an ironclad monopoly over the market. Devoid of other options, people are forced to buy the substandard vehicles made by local companies. Is this really support for domestic manufactures or taking a nation hostage and robbing them of their wealth!?”

Parsaei is not alone in condemning the upstart and inefficient automakers’ shenanigans; many have openly and strongly castigated the callous moves by IKCO on social media.

However, the industries minister and head of Consumer and Producer Protection Organization (CPPO) are of the opinion that the price increase are within legal boundaries.

Industries Minister Reza Rahmani says, “[As far as I know] the price hikes are not illegal, however, the CPPO is the authority to officially comment on the matter.”

CPPO Stance

Abbas Tabesh, the  CPPO boss  said, “IKCO has announced prices for models which were exempt from government price regulations. Therefore, the company did not need special permits to increase prices.”

Over the past several months, prices of cars, like almost every other item in the chaotic market, have risen to levels unseen in recent history.

However, local news outlets have been quoted as saying that auto manufacturers do not have “official permission” to increase “factory prices”. There was no way for this newspaper to verify who is right and who is not!

Following the reimposition of US sanctions in May and in a desperate move aimed at regulating the chaotic auto market, the Industries Ministry set up a task force to look into issues related to the key sector and propose new policies and prices.

The task force is led by the CPPO, and another state body, the Market Regulatory Authority, an ad hoc committee, created to check inflation and price gauging.

While the task force is yet to announce its decision, informed sources told the Persian economic newspaper Donya-e-Eqtesad that a new pricing policy is in the wings according to which “factory prices of cars will be set 5% lower than the market price.”

For some time now there has been a wide gap between market and factory prices with dealers charging twice the factory prices. Should the government decide to go ahead with the unfair and inauspicious new pricing mechanism  factory prices of cars will increase significantly.

CPPO’s chief says that the organization has prepared a report on increased overheads of the auto industry that  will be delivered to the Market Regulatory Authority this week.

Tabesh says that based on CPPO’s findings, new factory prices of cars costing 450 million rials ($3,214) or less will be determined by the government-backed taskforce. He said prices of vehicles costing above this threshold will be determined “by market mechanisms.”