Car Lottery Expected to End

EghtesadOnline: With the rise in vehicle production in the current fiscal year (started March 21), the termination of car lotteries is possible, according to the CEO of Iran Khodro Company (IKCO).

News ID: ۷۸۷۷۸۹

03 April 2022

Mehdi Khatib added that production growth is estimated to reach 350%, Donyaye Khodro reported.

Referring to the unexpected visit of President Ebrahim Raisi to the main parking lot of Iran Khodro on April 2, Khatibi said there were 12,000 vehicles in the company’s parking lot on March 2, which have been completed and delivered to customers.

“The daily delivery of vehicles reached 4,000 units, of which more than 1,000 units were delivered to customers who visited Iran Khodro’s production sites,” he said.

“Iran Khodro's plan for the fiscal 2022-23 is to produce 750,000 vehicles, including 725,000 passenger cars and 25,000 commercial and heavy vehicles, which will be higher than the president’s order of increasing production by 50%.”

The IKCO chief assured that with the significant increase in production, car lottery is expected to end within the next three months.

“The 350% growth in Iran Khodro Diesel will create jobs for 4,000 people and the production of 750,000 vehicles will induct 25,000 new workers in Iran Khodro Industrial Group and in parts manufacturers and suppliers,” he said.

Khatibi announced that the production of Samand and Peugeot 405 will end in the current fiscal year.

“These two products have the lowest satisfaction rate among Iran Khodro’s customers based on customer satisfaction indicators. Iran Khodro's goal is to produce modern cars with more features and increase customer satisfaction,” he added.

Claiming that more than 70% of a car’s quality pertain to the supply network and parts, the IKCO chief said, “In three short-, medium- and long-term frameworks, we have developed directives and intensified supervision to improve the quality of production lines.”

Announcing that seven upgraded products will enter the market, he stressed that projects have also been designed to produce K125 and TF21 cars in the first half of the next fiscal year (starting March 21, 2023), “which will be liked by customers”.

Khatibi stated that TF21 is a class B car with modern and advanced facilities.

“The designing period for this car has been set at a total of 18 months, which is a unique development in the domestic car industry,” he said.

Main Problems of Automakers

Liquidity problems and debts owed to component makers are among the main problems currently facing car producers.

“Order pricing has gradually weakened the financial capacity of automakers and if the Money and Credit Council does not approve facilities, a downtrend in current automotive production is not far from expectation,” Ahmad Nemat-Bakhsh, secretary of the Iranian Vehicle Manufacturers Association, was quoted as saying by Khabar Khodro.

“Last week, the Money and Credit Council decided to provide facilities worth 100 trillion rials each to the two major automakers of the country [IKCO and SAIPA], which unfortunately has not yet been approved. Therefore, there are concerns that production will decrease in the last month of the current fiscal year [ending March 20] due to a lack of liquidity.”

The official also added that there are about 120,000 incomplete cars in the carmakers parking lots.

The domestic auto industry's debts to parts makers have reached 450 trillion rials ($1.45 billion), according to a member of the board of directors of the Association of Homogeneous Propulsion Industries and Component Manufacturers.

Reza Rezaei added that the massive debt has built up over the years, such that 120 trillion rials ($387 million) of the total only pertain to the previous fiscal year (ended March 2021).

If the needed components are not supplied, the automakers will face problems in maintaining their production and finishing the incomplete cars.

Automakers Seeking Liquidity Boost

The two major auto manufacturers were also negotiating with banks to boost liquidity for increasing their production by 260,000 units in the fourth quarter of the current fiscal year (Dec. 22, 2021-March 20).

“Following the change of CEOs of the two major automakers, negotiations have been held with banks to provide 50 trillion rials [$189.39 million] to each of the automakers. This payment will be used to finish the incomplete cars and increase car production. However, so far, no talks have been held with component makers to increase production,” Rezaei was also quoted as saying by Khabar Khodro.

According to the Persian economic daily Donya-e-Eqtesad, SAIPA’s new CEO was appointed on Jan. 12 and the CEO of Iran Khodro Company was replaced on Jan. 29.