Selected Automakers to Join IME

EghtesadOnline: The long anticipated plan to bring auto trade to the capital market is reportedly coming to fruition.

News ID: ۷۸۷۲۵۸

06 November 2021

Carmakers are set to offer vehicles at the Iran Mercantile Exchange and the IME says there is no barrier to selling a limited number of cars via this market.

“Cars that are not subject to pricing mechanism [by the government] can be offered at the IME” Javad Jahromi, the IME deputy for operations told IRIB news.

According to Jahromi, there are two categories of cars: those that are subject to special pricing mechanisms and those that are not.

“The government will announce a new pricing system for the first group in the near future,” he said. “Cars that are exempt from [mandatory] government pricing can be sold at the IME”.

Jahromi said the IME has held talks with Iran Khodro (IKCO), the biggest domestic auto maker and the Bahman Group.

Limited models produced by IKCO are not subject to the controversial mandatory prices and are largely produced by the Bahman Group.

“About 90% of Bahman Group vehicles can be offered at the IME,” Jahromi said. As for the prices, he said that would reasonably be the function of the market. It will neither be based on the free market nor factory prices. “It will be something in-between.”

Similar to other products that recently made debut at the IME, cars too would join the list following efforts to curb, and possibly eliminate, the government’s intervention in pricing.

Dysfunctional Policy

There have been persistent calls by capital market authorities and shareholders on the government to rethink its apparently dysfunctional policies of imposing prices on goods made by listed companies and let the market decide.

They argue that price caps set by the government are usually lower than the real prices and to the detriment of manufacturers and shareholders.

Earlier in the week, the Economy Minister Ehsan Khandouzi said the pricing mechanism in the auto industry has been revised and would be announced soon.

Observers are understandably skeptical about the success of changes in new pricing procedures and insist that a permanent end should be put to the decades-long imposed prices.

Majid Eshqi, managing director of Securities and Exchange Organization has said that the new pricing mechanism will benefit carmakers.

In the past several years, the so-called Competition Council is in charge of setting prices of a number of domestically-produced goods.

Reza Shiva, a former head of the council earlier defended the pricing mechanism and ascribed the carmakers losses to “misplaced investments.”

“The mounting losses of carmakers are largely due to [the performance of] their subsidiary companies. The council has not imposed only losses on the auto companies,” he said.