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Car Sales Sluggish

Sep 13, 2016, 12:17 PM
News ID: 3142
Car Sales Sluggish

EghtesadOnline: Iranian carmakers recently announced a raft of new automotive production deals that could alter the buying habits of car buyers in the Islamic Republic–maybe even the end of the humble sedan.

With the ink on those deals signed with PSA Group’s Peugeot and Citroen brands now firmly dry, as well as Renault’s deals, will car buyers actually get a range of vehicles that could replace the aging fleet on the roads?

Some industry insiders suggest car buyers across Iran are in for a sharp shock as the prices of new cars are actually increasing on a monthly basis and will price them out of any perceived gain.

Earlier in August, it was reported that SAIPA, Kerman Motors and Modiran Vehicle Manufacturing raised the prices of several models, much to the surprise of the country’s car buyers.

Gholamhossein Qasemi, deputy director of Iran’s Auto Dealer Guild, said at the time that this new development follows on the heels of the long-lasting stagnation in Iran’s auto market.

That statement disappointed people expecting the Joint Comprehensive Plan of Action (signed between Iran and six world powers to remove sanctions against Iran in lieu of curbs on Iran’s nuclear program) to cause a decline in prices.

  Good for Producers

Certain movements in the automotive market suggest that things look positive, at least from the local manufacturers’ viewpoint.

Recently, Financial Tribune reported that SAIPA, Iran’s second largest carmaker, announced it had produced 198,592 vehicles since the onset of the new Iranian year (March 20, 2016).

This was followed by Iran Khodro’s announcement of improving sales of certain vehicles, as new models roll off their production lines.

But, for the common people, it seems business as a usual, as people assume they cannot buy cars due to their rising prices, especially the recent imports from Europe and Asia.

This perceived lack of interest could stem from the fact that a majority of cars sold by the two biggest car groups are the same they have been selling for over a decade; in essence, more Peugeot 405s, IKCO Samands and SAIPA Prides hitting the asphalt.

  Old Models Still Reign

So far, the number of new models is still dwarfed by the historical models that are affordable but predictable. This offers a glimpse into the buying habits of the vast majority of working-class Iranians.

Take, for example, Iran Khodro (IKCO), which recently announced on September 1 that their production in the first five months of the current Iranian year registered a growth of 36% year-on-year or 57,879 units.

According to the company’s statistics, the Renault Logan (Tondar 90), Peugeot 405 and Peugeot 206 grew by 91%, 25% and 11% respectively in that period–much the same as in previous years.

New models produced under joint ventures like Sandero are in the low hundreds and did not make the official press release that the Tribune published at the time, according to Financial Tribune.

The market malaise was further entrenched by the three main imported brands, namely Hyundai, KIA and Toyota, which again are offering the same range of models, albeit upgraded ones.

These companies witnessed a marked improvement in sales–25,876 vehicles were imported, registering a 47% year-on-year rise, with 8,219 Hyundai cars imported in the first five months of the current year.

However, these companies are still suffering from a lack of affordable cars, with many of the models currently popular in Europe unavailable here.

Iraq may be still helping companies like SAIPA produce a range of affordable vehicles for its markets, though with the current government diktats already in play–those that say 30% of models should be exported across the region–local buyers do not favor such vehicles any longer.

The interest in vehicle manufacturers like MVM, whose Chery and unique offers allow car buyers to put deposits down of 100 million rials on all cars of their brands, shows that customer satisfaction remains at the bottom end of the criteria for leading Iranian carmakers.