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the production of parts for cars, have moved up by an average 40% in the past three months. Several Chinese producers of low-cost vehicles for the Iranian market have come unstuck in recent weeks, failing to pay their parent companies in China due to the nosedive of the IRR’s value.
President Hassan Rouhani has called on the country’s judiciary to stop grey imports of vehicles and to tackle corruption in the auto sector, Iran Front Page (IFP) reported on July 14. Premium vehicles, including luxury marques like BMW and Lexus, are subject to the ban on imports on listed products announced earlier this month to stem the depletion of the country’s stocks of foreign exchange amid its new economic difficulties.
However, demand remains strong for the cars among certain wealthy groups in Iran and alternative methods of sourcing the vehicles have sprouted as a side-effect of the strict import policy. Rouhani made his call after receiving reports from three different ministries that specific groups in the country were ignoring the calls to halt vehicle imports. The president asked the judiciary to do whatever it takes to immediately address the situation, see that offenders are brought to justice and ill-gotten gains are restored to the public purse. “Thanks to the efforts by officials and based on all of the reports presented, we can speak of the possibility of organised corruption through the collaboration of some state agents, a computer company and several car importing firms,” said the president. Rouhani added: “[This action] is in line with my commitment to the principle of transparency and understanding of the necessity that government must start this campaign against corruption.”
Iran’s car market is slipping into recession, according to June 19 reports from Iranian media outlets. Tasnim News Agency reported, for instance, that potential car buyers are holding off from making purchases given the sudden price hikes introduced for new and second-hand vehicles. The price inflation has been caused by the collapse of the IRR. Car producers and importers in Iran have reluctantly but inevitably increased their vehicle prices. Imported vehicles have also been hit by the ‘invisible double tax’ as most are classed under the “luxury” label and are thus not eligible for the official rial to the dollar rate. Demand for cars continues to slide as a great many Iranians are priced out of buying locally assembled vehicles, including the more than 30-year-old Peugeot 405 model which continues to be produced under a joint venture arrangement with Iran Khodro (IKCO), Iran’s largest auto manufacturer. Second-hand vehicles have also increased in price in recent weeks as more buyers are pushed into the market.
Sudden price rises are not new to the Iranian car industry, and with each bout of devaluation of the IRR, prices usually ascend by a minimum of 5%.
Iranian car manufacturers are caught in a dilemma when it comes to the exchange rate fluctuation because they must limit their price hiking in accordance with figures which are set by a committee that comes under the Ministry of Industries, Mining and Trade. The committee, which consists of government ministers, is required to set prices on a monthly basis, but it is now under pressure to raise auto prices without alienating those left in the shrinking pool of car buyers.
38 IRAN Country Report September 2018 www.intellinews.com