As Iran’s economy continues to feel the effects of ever-toughening sanctions,
the country’s conservative media continued this week to report a dramatic
downturn in the Islamic Republic’s automotive industry, the country’s second
most lucrative after oil and gas.
Conservative news site Shafaf News –
close to Tehran Mayor Mohammad Baqer Qalibaf – reported Tuesday that the Iran’s
currency crisis has seriously affected the domestic automotive market, despite
promises by the government to control the economy.
Car prices are rising
because of the fluctuating exchange rate, Shafaf said.
The
Persian-language service of Iran’s Fars News, linked to the IRGC, reported on
Wednesday that while Iran’s largest automaker, Khodro, has recently announced
sharp hikes in car prices, the company’s car loans have remained static, making
it harder for Iranians to purchase new automobiles.
Last week Fars News
reported that Khodro had sent a directive to all its sales representatives,
instructing them of a steep price rise. All Khodro’s cars have risen by as as
much as 20 percent, or 2 million to 5m. tomans, with the price of the popular
Peugeot 206 model rising by 3.6m. tomans, the report said.
As
automobile production in Iran slows down, the country’s auto market is starting
to suffer from a shortage in new cars, which has led to a drop in sales,
according to conservative website Asr-Iran.
Asr-Iran noted that
automobile production was down 42% overall in the first half of the Iranian
year, while figures for August and September show that production is down over
66%, according to a report on the latest Industry Ministry
statistics.
One important reason for the production slump is that
sanctions have forced international carmakers to suspend sales of car assembly
parts to Iranian automakers.
In May, French company PSA Peugeot Citroen
announced it was suspending shipments of car parts to Khodro, citing financing
problems as a result of sanctions.
While Khodro vowed it would
manufacture the missing Peugeot parts locally, in reality the difficulties in
importing parts has led to the manufacturing slump, which together with an
increase in local prices has led to a sharp drop in domestic sales, as buyers
holding out until prices drop again, according to Asr-Iran.
Iran’s auto
industry slump has also started to affect auto workers, who are facing job cuts
and layoffs. The Human Rights Activists News Agency, which publishes news of
human rights violations, reported that the Saipa auto plant in Kashan, Isfahan
is likely to fire over 75% of its workforce.
Saipa’s Kashan plant is a
major local employer and according to HRANA has over 10,000 workers and operates
three daily shifts.
HRANA also reported that Saipa’s Tehran auto plant
has reduced workers’ shifts from three to one and has closed production
lines.
The downturn in Iran’s automotive industry will likely have
serious and farreaching repercussions for the regime and the IRGC, who own large
large stakes in the country’s largest automakers. Over the past decade and a
half, the auto industry boomed as Tehran deemed it a priority industry, to
create revenue for the regime in the wake of ever-tightening US and European
sanctions.
Both of Iran’s leading automakers, Khodro – the largest car
manufacturer in the Middle East – and Saipa, are subsidiaries of IDRO, the
government body responsible for accelerating Iran’s industrialization. According
to Swiss sanctions legislation, IDRO controls companies linked to Iran’s nuclear
and missile programs including foreign procurement of technologies to aid
them.
Another Iranian automaker, the Bahman Group, which manufactures
under license for Mazda, is 45% owned by the Iranian Revolutionary Guards Corps,
according to a report by Iranian national newspaper Hamshahri.