The former CEO of Saipa told Bazar that the government has liberalized prices for many goods, effectively releasing control over everything. However, it remains unclear why authorities only cling to car prices.
According to Jadeh Makhsoos Information Base, continuous currency rate fluctuations, rising production input costs, and increasing restrictions on currency allocation have made operations more costly for the country’s automotive industry. Continuing with past formulas is now more expensive than ever. Automakers grapple with accumulated losses and rising raw material prices, while a system of mandated pricing challenges them. To examine the status of car pricing and the role of automotive industry officials, we interviewed Saeed Madani, former CEO of Saipa Automotive Group. The central question is how policymakers should adjust these prices to avoid both consumer pressure and producer losses.
Madani stated that, given current conditions, policymakers must adjust car prices. Currency allocation has become extremely difficult; authorities have reduced preferential and even transactional currency. Consequently, production costs have naturally increased.
If the pricing system is to remain, policymakers must assess how much automakers’ production costs have increased and apply price increases accordingly. All items saw price increases; inputs became expensive. Naturally, if policymakers intend to control a price, they must control input prices, such as petrochemicals, steel, copper, zinc, and other raw materials. Otherwise, car price increases will reflect input price increases.
Jadeh Makhsoos reports that some believe car price increases do not align with the inflation rate. Madani explains that usually, car price increases do not align with the inflation rate and only cover a portion of inflation. For instance, if inflation stands at 40 percent, the increases automakers received during this period were, on average, much less than inflation. Car price increases have always fallen below the actual inflation rate, but policymakers have no choice but to make this adjustment.
Automakers saw price growth in the past month, but the surge in exchange rates has practically rendered this increase ineffective. Madani suggests that to control prices, mechanisms existed, such as providing a high percentage of advance payment when automakers sign a contract with a parts manufacturer. This allows the parts manufacturer to make main purchases at that time and avoid subsequent price increases.
Another approach is that if policymakers intend to control car prices, they must also control production input prices. This means steel, copper, aluminum, and petrochemicals should not experience unusual price increases. These factors can control car prices to some extent, but they do not achieve complete control. The real control mechanism emerges when supply and demand determine the price. Otherwise, automakers will still face high accumulated losses, operating at a loss margin even with current methods.
Inflation manifests daily, but car price increases usually happen every 6 or 7 months, or even once a year. These increases are not proportional to inflation, which is why automakers always fall behind in pricing. Consequently, these losses not only remain uncompensated but also persist and grow.
Madani believes industrial policymakers cannot remain completely passive on car pricing. He states that policymakers cannot claim they have no role, but in practice, they prevented price increases. This contradiction has caused disagreement between the automaker and the ministry, and authorities have even filed a case against a large automaker. These behaviors harm the industry.
