Iran: Presales Sidestepping Vehicle Standard Regulations, Deadline

EghtesadOnline: Despite the Iranian government’s promise to halt the production of substandard cars in a few months, recent moves indicate local carmakers are moving in the opposite direction.

News ID: ۷۸۵۱۳۱

15 December 2019

There had been a protracted debate in Iran over phasing out the production of poor quality cars like SAIPA’s Pride and Iran Khodro’s Peugeot 405. And in the past few months, officials announced plans to halt the production of these models in the near future.

However, carmaker Iran Khodro (IKCO) has been registering presale orders for the same model that will be delivered next year, an official with the Department of Environment says.

Behzad Ashjei took to Twitter to criticize the carmaker for the underhand move. “The DOE will certainly take action against the carmaker,” Financial Tribune quoted him as saying.

He pointed out that IKCO is registering preorders for vehicles that barely meet the Euro 4 standards.

While the production and delivery of such vehicles are to be halted before March, IKCO has proclaimed in advertisements to deliver Peugeot 405 after the deadline.

According to Nayereh Pirouzbakht, the head of the Institute of Standards and Industrial Research of Iran, the production of Pride and Peugeot 405 will be stopped as of March 2020 and license plates will not be issued for these vehicles, Mehr News Agency reported in November.

“The automakers are ordered to offer alternatives for the models or develop new cars that comply with standards,” she added.

Pirouzbakht said the plan is to gradually remove substandard vehicles from production lines, adding that ISIRI will soon publish a progress report.

According to the ISIRI chief, those who have already purchased the two models will receive their vehicles before the set date, but license plates will not be issued for vehicles produced after this date.

The move is based on a multilateral agreement reached by the two domestic carmakers (IKCO and SAIPA), the Industries Ministry and Iran Traffic Police.

However, IKCO is sidestepping the regulation by registering orders for Peugeot 405 by setting the delivery date after the ISIRI deadline.

Policymakers and industry executives had also promised to halt the production of these two cars and replace them with better quality vehicles in the past, but this did not materialize in the absence of suitable alternatives.

Amir Hassan Kakaei, a market analyst, says there are no suitable alternatives for these models.

"The automakers continue to suggest substitutes that are of better quality compared to Pride and Peugeot 405, but a wide price difference makes the substitutes unappealing for customers," he said.

Kakaei believes that there are no substitutes for the two models and their retirement "will force customers to go for other models".

Life Hazard

Pride was originally developed for Japanese and South Korean markets in the late 1980s. The car was widely sold in the United States as a Ford Festiva in the early 1990s. It entered the Iranian market in 1993 under license from Kia and has continued to be a cash cow for SAIPA.

The South Korean firm ended the production of  Pride in 2000.

Referring to a recent study conducted on Iranian road traffic accidents recorded over the past decade, Traffic Police chief, General Kamal Hadianfar, said in late September that Pride was involved in one-third of the fatalities.

Road accidents claimed 206,049 lives in the 11-year period ending March 2019, data from Iranian Legal Medicine Organization show. According to the research findings, up to 34% of the figure, constituting 70,056 victims, died in a Pride car.

“Speaking of driving safety, drivers’ adherence to traffic regulations is of the highest importance, but a vehicle’s quality also matters. Pride lacks the required standards of a regular passenger car and leads to an average of 3.8 deaths in each crash,” Hadianfar added.

Standard Issues

As per reports by Iran Standards and Quality Inspection Company, affiliated to the Industries Ministry and the body in charge of inspecting vehicles, Pride suffers from low quality and lacks several safety features. In fact, the car never earned more than one star in the organization’s five-star ranking system.

The model has been produced for more than two decades now, until it was thrust into the limelight when the director of ISIRI publicly criticized the production of the inferior model.

Three years ago, ISIRI and Iran’s Automotive Policymaking Council set new automotive standards and gave a two-year ultimatum to automakers to comply.

The production of vehicles that fail to comply with 83 automotive standards was supposed to be halted by the end of 2018.

SAIPA's Pride and Iran Khodro’s Peugeot 405 topped the elimination list.

However, when the deadline drew closer, carmakers started protesting about “the sudden imposition of stringent rules”.

Carmakers complained that if the new standards are imposed, they will be forced to shut down 70% of their production lines and lay off thousands of workers.

Despite the growing criticisms from environmentalists and the public against Pride production, former CEO of SAIPA, Mehdi Jamali, maintained that the production of the model will continue “as long as there is demand for the model”. He was later detained on charges of hiking car prices without official authorization.

Pride remains a favorite as it is the cheapest car in Iran, sold at the company price of 373 million rials ($2,986). The vehicle is currently traded at 520 million rials ($4,160) in the open market.

SAIPA says it has sold over 7 million Prides since production started in 1993 in Iran.