A car on display during Tehran's Car Show (January 2024)

Iran’s Top Carmakers Need Urgent Financial Boost

Friday, 02/02/2024

In a letter to the Governor of Central Bank, Iran’s industry minister has called for more funds for the country’s two main government-controlled automakers: Iran Khodro and SAIPA.

Minister of Industry, Mine and Trade Abbas Aliabadi told Mohammad-Reza Farzin that the two car manufacturers face financial difficulties due to existing high inflation. The government claims the companies have not increased car prices, as an anti-inflationary measure, although prices have risen in the market in the past year. The move can be a prelude to a government-sanctioned rise of car prices.

Aliabadi requested an immediate increase in their credit limits, suggesting 100 trillion rials (about $200 million) for Iran Khodro and 50 trillion rials (about $100 million) for SAIPA. Aliabadi claimed that the request is in line with the Deputy President Mohammad Mokhber's approval for enhanced production in the final months of the Iranian year (which ends on March 20) to stabilize the market.

According to Iranian auto industry expert Farhad Ehteshamzad, the country’s state-owned carmakers are incurring daily losses of $3.7 million, totaling over one billion dollars annually. He claimed that the huge loss is the direct result of the government’s interventions in the auto industry.

Iran’s car industry is mired in a wide range of problems. The main manufacturers are owned by the state and enjoy huge incentives and support from the government. Despite the losses, Iran’s automotive industry is the third most active sector, after oil and gas sectors, accounting for about 10% of Iran's GDP and 4% of the workforce (700,000 persons). It was valued in 2020 at $26.4 billion by India-based Modor Intelligence, which forecasts 10 percent sectoral annual growth to 2026. This would be possible without sanctions and with a new infusion of investments and foreign partnerships.

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