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EghtesadOnline: Over the past several months the tire industry's profit margin has shrunk significantly thanks to the rising prices and shortages of raw materials amid hard economic times.

Given the litany of problems the industry is facing, chairman of the Iran Tire Industry Association has called on the government to offer tax breaks to tire companies.

"The industry's profit margin has dropped to 6% and companies can barely make ends meet. Manufacturers are saddled with higher costs and overheads… Tax exemptions can make things a bit easier," local news website Asr-e Khodro quoted Taqi Ganji as saying.

Since the US re-sanctioned Iran in August 2018, the country is grappling with economic problems including a sharp fall in the value of the rial. On Saturday the US dollar was traded at 114,000 rials in Tehran. The greenback was sold for 160,000 to 180,000 rials some months earlier. In March it hardly fetched 42,000 rials, Financial Tribune reported.

Volatility in the currency market and struggling to preserve the dwindling foreign currency reserves, the government was forced to introduce a multitier system for allocating subsidized currency for imports. 

The raw material imported by tire companies was initially in the second priority list not eligible for subsidized currency. But in recent months when the rial tanked further and tire prices jumped to unprecedented highs (especially for heavy-duty vehicles) the government was forced to rewrite its forex policy for the industry.

"Although policy changes have been introduced, tire makers are still grappling with huge problems," Ganji said, noting that old machinery and lack of raw material are still among challenges that remain unresolved. 

With prices rising at terrible speed in almost all sectors of the economy, the Ministry of Industries earlier last month approved a 30% increase in tire prices. 

Ganji, however, says that that is not enough and the industry needs much more government support to be able to survive.

 

Iran raw materials Tire Industry Tax Break Tire Companies profit margin