Khodro has always been considered as a consumer and capital good in Iran, and for this reason, the price of cars in Iran is always an attractive issue for traders, speculators and real car buyers from a capital point of view. After the announcement of the US election results, all of Iran’s capital markets took a different path from politically pessimistic views, and in a way, the government had the opportunity to put some of the necessary market reforms to the test.
One of the markets that was accompanied by price correction after the US election due to lower inflation expectations is the car market. In this analysis, we will examine the factors affecting the price of the car and the outlook for this capital good. Please be with Artan Press.
*** Decrease in car price index in December
Perhaps few people in the early days of tuberculosis imagined price reform in the automotive sector. The car market had been in an accelerating cycle in pricing for about a year, and practically by jumping in the prices of high-volume products of Irankhodro and Saipa, one could practically control the reform in the next one year and early in the presidential election. A review of price correction indicators in the fall of this year shows that in November and December, the most corrections in the car market occurred in the last three years.
In November, with the systematic decrease in the price of gold and currency, we saw a drop in prices in other commodity markets, and the car also benefited from this decrease. The domestic car price curve has seen an upward trend in several periods this year and even snatched the lead in the growth of many goods, which is now very significant according to the Statistics Center, but this time the price of domestic cars decreased. They have been unprecedented.
*** Factors of recession and correction of car price
Many factors led to the recession and severe correction of car prices in Iran, one of the most important reasons for which was the decline in exchange rates, lower inflation expectations of the society from next year and most importantly the closure of car companies and exhibitions. The commodity nature of the commodity, and because of its moderate liquidity, requires physical scrutiny, and this has led to many car deals being locked up and, in effect, a severe recession in the market.
In the current situation and with the sharp decline in prices in the open market, a will has been created that can keep car prices in Iran in a balanced range forever. Given the market conditions, some experts advise car policy makers to provide further pricing in the market by providing pricing based on the supply and demand mechanism and eliminating the regulation of car order pricing. With car prices falling due to the elimination of the ordering mechanism, it is the market that makes the final decision on prices. Therefore, car price policy makers should make the best use of this reform.
*** The current approach of car companies
The current approach of car companies in Iran is to maximize the production and circulation of cars. In the current situation, car manufacturing companies have set themselves the prospect of producing 2 million cars per year, which is taken from the amount of car transactions in the country last year. Automakers believe that by increasing car production, they can fully feed the car market in addition to compensating for the losses of previous years.
Despite the fact that in addition to increasing car production, it has been recommended to discuss quality and upgrade it, but it can be seen that according to carmakers, especially during the recent visit of Minister Samat to both major car manufacturers, car production is increasing, but quality seems to be in place. This is an issue that in the coming years could pave the way for the failure of the Iranian car industry and provide high costs for the economies of less affluent households.
*** Peugeot 2008 is the only five-star car
This became an excuse to examine the quality level of domestically made cars. Unfortunately, the statistics published in this field from news sources are not very satisfactory. For example, according to the November assessment, the 2008 Peugeot is the only car that has been able to get all five quality stars, while only four cars have managed to get four stars. Of course, on the other hand, we do not have a single-star passenger car, and only two cars have become two-star.
The issue of car quality, along with the increase in factory prices by car manufacturers, is an issue that has greatly overshadowed the car market in the days of the car market downturn and has made car deals very embarrassing. It is not enough confidence in the market that the prices are falling every day, but the interesting thing in the market is that the factory price of one of the brands exceeds the market prices of its products.
*** Status and cash sales price of car managers’ products
A look at the situation and cash sales price of car managers’ products reveals interesting points. The company’s website lists prices for cash sales and 45-day delivery, which are higher than market rates and naturally have no applicants. This is unprecedented for the car market to date.
There are different perceptions of this event. Either the car market will continue to decline or we will soon see a sharp rise in prices at the end of the year and early Eid. One thing that can be boldly talked about is that current prices are by no means equilibrium market prices.
*** Entry of imported cars into the car market
Another factor that has entered into car transactions and to some extent has influenced the adjustment of prices in the short run is the entry of imported cars into the car market. Take a look at authorized sites
Car sales, what attracts attention is the supply of some imported 2019 models in the market; Cars that had been banned from importing into the country since 2018, but are now available on virtual shopping sites.
Many analysts believe that the cars that were branded as imported cars in 2019 in the showcase of virtual sites are depot cars available at customs. But according to car market activists, the licensing of two importing companies has led to the supply of these cars in the market. The fact that the import of foreign cars is monopolized by the manufacturing companies will not create a good outlook for car prices.
*** Control prices by liberalizing car prices
Another factor that has played a role in controlling car prices in the domestic market is the issue of price control through car price liberalization. For many reasons beyond the scope of this discussion, this method has no effect on current prices because even now the market price of most cars is much higher than the factory.
In the current situation, parts manufacturers have a very important role in determining the final price of cars. The final price of the car is determined from the factory based on the daily rate of the goods consumed by the car manufacturers. In the current situation and due to restrictions on the import of auto parts, the market provides its consumables with high costs. Therefore, we can not expect a decrease in prices, even emotionally. But if the price of goods used in car production falls, so should the price of cars naturally fall. In the current situation, it is not possible to see parts entering the market in the short term. In the current situation, the market is monopolized by parts manufacturers and government subsidies are not enough to control prices. Therefore, prices cannot be expected to be controlled by component manufacturers.
*** Activity of component makers in the form of holding
Recently, parts manufacturers have been offered to play a role in car production in the form of holding companies. This is a bit of a strange decision proposed by the Ministry of Silence. Car manufacturing companies in Iran with more than 50 years of experience have unfortunately not reached a sufficient level of maturity in the production of quality cars and the entry of parts manufacturers into this market does not create any competitive advantage for the end consumer.
Unfortunately, in the current situation in the car market, quantity and number of circulations have been given priority over issues such as quality. Automakers are now in a situation where even if they deliver their cars incompletely to customers, customers are willing to buy. A similar thing happened in the 1970s, when people were willing to take the defective arrow from Iran Khodro.
This issue could not be clarified until the introduction of one of the products produced in Iran in the presence of the Minister of Automotive Industry. In the video released from the ceremony, it is clear that the car does not start, and even in the published photos, it is clear that even half of the car’s taillights do not turn on.
In conclusion, if the car price liberalization is implemented, the general level of prices will be lower in the short run due to the reduction of speculation. But this factor can not be considered as a stabilizing issue in car transactions. In the current situation, the government is trying to direct the profits from car transactions in the open market to car manufacturers. It remains to be seen whether the Toulon government will confront the speculators. Or it is the brokers who will take over the pulse of the market.
It seems that, as in previous years, with the onset of the cold season, the car market is entering a deep part of its hibernation, and the expectation of falling prices from customers has caused the market to experience a deep recession. But if factors such as the cross-sectional growth of the exchange rate are accompanied by parameters such as the reduction of direct supply, we will see price growth in the days leading up to next year.
The outlook for the Iranian car market will be strongly influenced by factors such as the exchange rate, the level of inflationary expectations of society and government policies towards manufacturers. The important issue in the current situation is to stop the fall of prices and strengthen the signals of rising car prices in the market.
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