March 16, 2018
While carmakers and auto dealers expected a surge in demand during the closing days of the current Iranian year, the head of Tehran Auto Dealers Association said car sales have plummeted—probably because prices have spiked.
“In the past three weeks, the auto market has observed a sharp fall in demand,” Saeed Motemani was quoted as saying by the Young Journalists Club last week.
As is customary in Iran, demand for goods from food to vehicles spikes as the year comes to an end and families prepare for the New Year holidays. However, according to Motemani, demand for vehicles has fallen well below expectations.
“The price of locally manufactured vehicles has seen a hike of 18 to 80 million rials ($400-$1,800) over the past few weeks,” he said.
Motemani believes the recent decline in demand is due to the surge in prices.
In recent months, local carmakers have introduced several new models, including the Renault Sandero Stepway and an upgraded version of the Peugeot 207. Both models were warmly welcomed by car buyers. However, the automakers are unable to meet the local demand due to the low production rates of the two models, which has given rise to a price bubble.
“For instance, the Peugeot 207 with automatic shift is priced at 490 million rials ($10,900) by Iran Khodro [the vehicle’s local manufacturer], but dealers are selling the car for 570 million rials ($12,700) in the open market,” a markup of one-sixth, he said.
“Pars Khodro, the local producer of Sandero Stepway, has put a price tag of 500 million rials ($11,100) on the vehicle with manual transmission, but the vehicle is sold for 570 million rials by the dealers,” a markup of one-seventh.
In addition to the price hike, market insiders are of the opinion that auto market stagnation can also be a side effect of recent volatility in the foreign exchange market.
The foreign exchange volatility has drawn money away from the auto market and encouraged many to invest in the greenback or gold, the Financial Tribune said.
Furthermore, Iranian carmakers have forged several joint production deals with their foreign automakers. Some car buyers may also be delaying any purchase as they await the new models.
