EghtesadOnline: Iran’s automotive output increased by 21% during the first five months of the current Iranian year (March 20-August 21) compared to the year-ago period.
According to data released by the Ministry of Industries, Mining and Trade, Iran’s major automakers Iran Khodro Company (IKCO) and SAIPA produced a total of 360,599 cars and commercial vehicles during the five-month period, which figure was 298,307 last year.
The data illustrate that of the total production volume, 286,363 vehicles have been delivered to customers during the period, which is 9% higher year-on-year.
During the month ending Aug. 21, the two automakers produced a total of 110,471 vehicles, registering a 49% rise month-on-month.
The ministry expects the annual automotive output to reach 1.2 million by the end of current Iranian year (March 2021) in order to compensate last year’s output fall.
According to the ministry, last year’s automotive production rate hardly reached 865,000, indicating a 9.6% YOY decline.
This is the second time since May 2019 that the ministry has released an auto production report. Last year, analysts were in the dark, because the ministry stopped releasing auto production data in the face of massive consecutive declines.
Since last year, the data were extracted from financial statements submitted by automakers to the domestic stock exchange.
Mismanagement, corruption and the pressure of US sanctions, now coupled with the Covid-19 outbreak, have derailed Iran’s auto industries.
SAIPA and IKCO have grappled with numerous scandals over the past few months, including the arrest of several managers of the two companies on charges of implementing an unauthorized price hike and committing fraud.
Industry insiders and local media have speculated that the two companies are on the verge of bankruptcy and, as usual, demand governmental financial assistance to help bail them out or make thousands jobless in the chronically dysfunctional automotive companies.
The types of cars available to Iranian customers have declined after the US reimposed harsh sanctions against Iran in the summer of 2018.
Almost all foreign partners of Iranian carmakers pulled out of the country after US sanctions targeted Iran’s automotive industries.
Even international auto parts makers with decades-old ties halted sales to Iranian firms, as the US embargo threatened Iran’s access to US markets and disrupted the latter’s international banking relations.
As a result, even if a foreign firm wished to work with domestic companies, Iranian payment for the goods and services could not get through. All these have taken a harsh toll on Iran’s auto producers and assemblers.
Therefore, the production of 20 car models has been halted over the past year. Some of the cars assembled in Iran, such as Renault’s Sandero and Sandero Stepway, as well as Suzuki’s Grand Vitara, have stopped rolling out of IKCO.
IKCO also produces Chinese Haima and Dongfeng models, but the company is yet to announce whether it would be able to sustain the production of these models.
The Iranian firm also produces several Peugeot models, including 405 and 206. IKCO will reportedly continue the production of 206 and 405 since it has been making them for decades and only relies on the foreign supplier for some key parts.
SAIPA, the other major automaker in Iran, also used to make several models in collaboration with China’s Brilliance Auto Group and South Korea’s Kia, the production of which has stopped.
Pars Khodro, the third main carmaker, has halted the production lines of Renault Sandero and Logan.
South Korea’s Hyundai Motor also had a deal with Iranian private carmaker Kerman Motor to produce Hyundai i10 and i20 in Iran, which partnership has been suspended.
Several other Chinese brands were assembled by private Iranian automakers, such as BYD, Great Wall, MG and Lifan, which have entirely stopped their production activities in Iran.
Iran’s auto sector was hopeless and ailing even before US President Donald Trump imposed new economic sanctions in 2018 after pulling out of Iran’s historic nuclear deal.
As expected, the US penalties gradually obstructed the supply of raw materials and auto parts on a massive scale. Foreign carmakers and part suppliers walked away from the lucrative market fearing Washington’s ire.
Multifarious solutions have been proposed by authorities to minimize the negative impact of the US president’s open animosity and economic war against Iran’s major industries. The proposals have produced nothing worthwhile, while car prices have continued to soar.
The Industries Ministry is in charge of regulating the loss-making car manufacturing industry. Over the decades, the ministry’s thick ties with the undeserving sector and vested interests of some state actors have impeded efforts for undertaking effective reforms.
Corruption scandals involving hundreds of millions of dollars have further tarnished the auto sector’s public image. The scandals have made economic experts and informed observers wonder whether the paralyzed industry has a future.
As part of the ministry’s agenda to revitalize the monopolized sector, localization of parts and technologies has been prioritized by the government and carmakers. However, simultaneously, permits were issued for importing such trivial auto parts like mudguards.
In a 2018 report, reviewing data from the Islamic Republic of Iran Customs Administration, the Financial Tribune revealed that such permits had been issued for years. Such data are no longer accessible and it could not be ascertained whether the practice still continues.