CNG-Hybrid Output Declines in Iran Despite Increasing Demand

EghtesadOnline: With rumors circulating on social media that sooner or later the Iranian government will be forced to increase fuel prices and start rationing gasoline, demand for CNG-hybrid vehicles has soared.

News ID: ۷۸۴۶۴۶

07 May 2019

However, the production of such vehicles has been on a downward trajectory for long.

Over the past few years, Iranian officials have touted CNG-hybrids as a cleaner substitute for gasoline-powered cars and said the increasing promotion of such vehicles is part of their solution for curbing gasoline consumption.

However, data from the Industries Ministry show that in the past fiscal year that ended in March 2019, 42,994 CNG-hybrids were manufactured in Iran, 58% lower than the previous year’s production figures, according to Financial Tribune.

Following the imposition of harsh US sanctions against Tehran last summer, which blocked the import of raw materials and auto parts, Iranian car companies have been facing various headwinds and their total output has plummeted significantly during the 2018-19 fiscal.

The country’s largest automotive companies Iran Khodro (IKCO) and SAIPA churned out 798,928 cars during the period, reporting a 39.3% year-on-year decline in their production rate. This has come in the face of soaring demand for CNG-hybrid vehicles.

On May 1, reports went viral on social media and local news outlets that gasoline rationing would start the next day. Rumors claimed that every car owner would be eligible for a monthly gasoline quota of 60 liters at 10,000 rials (7 cents) per liter while extra fuel would be sold at the free market rate of 25,000 rials (18 cents) per liter without restrictions.

On Sunday, Spokesman for Majlis Presiding Board Behrouz Nemati told reporters that the plan to ration gasoline and increase fuel price has been suspended for now.

“The matter will be discussed in a joint meeting of the Majlis and government to find better ways of implementing the plan,” IRNA reported as saying.

While government officials and lawmakers have rushed in to reassure the general public that fuel prices will not be increased in the near future, people are eager to replace their gasoline-powered cars with CNG-hybrids. Many have also rushed to refit their fossil fuel-burning cars into hybrids.

Available Models

A closer look at the official auto production report shows that in the past Iranian year, IKCO and SAIPA respectively produced 36,850 and 6,144 CNG-hybrids each, indicating a 58.5% and 55% YOY decline in the production rate of such cars.

The companies offer three CNG-hybrid models based on

Peugeot 405 and Samand made by IKCO, along with SAIPA’s Tiba.

SAIPA used to make a hybrid version of its popular small car Pride. In the last fiscal year, production of the model was halted.

The most popular hybrid made in Iran was a model based on Peugeot 405, some 20,399 units of which were manufactured during the period.

Renewed Call

Abundant gas deposits plus cost-effective production justify replacing gasoline with compressed natural gas, director of the CNG office of the National Iranian Oil Refining and Distribution Company said.

"Iran has one of the biggest gas reserves in the world. Although CNG is less expensive than gasoline, we continue to manufacture gasoline-powered cars instead of natural gas vehicles," Hamid Qasemi was also quoted as saying last week by Fars News Agency.

“One cubic meter of CNG costs 4,140 rials (3 cents), while a liter of gasoline is sold at 10,000 rials (7 cents), meaning filling a tank with 20 cubic meters of gas costs 2.5 times less compared to the eco-unfriendly gasoline.”

There are over 22 million vehicles in the country, 4.5 million of which are gas-powered and 5.3 million CNG-hybrid vehicles.

Missing Factor

The underdeveloped infrastructure for offering services to motorists with CNG-hybrid vehicles and the low number CNG stations across the country have discouraged people from buying hybrids.

According to the National Iranian Oil Refining and Distribution Company, there are 2,380 CNG stations across the country. With a population of 82 million, there is one CNG station for every 34,453 people.

Tehran, with a population of 12 million, has 264 filling stations, of which 51 sell both CNG and gasoline.

This is while hardly 16 stations sell CNG to private cars. This means long lines and given the hectic life in the overcrowded capital, many motorists simply cannot afford to wait in the queues.