It seems possession of car to people play a significant role in their quality of life. Even if increment of private vehicles has some negative points such as more energy consumption, excessive traffic congestion, financial burden, more polluted air, decrement of public transportation patronage and so forth, it’s still reasonable to have a car because it is more comfortable comparing to current public transportation. In general, demand and supply determine cars’ pricing, but in Iran, the situation is different. In fact, Iran’s Competition Council set the vehicles’ prices which has its roots in supporting of consumers’ rights. By this way, automakers are not free to increase the price of produced cars as much as they want and there is a ceiling determined by this council.
By the presidential decree, the competition council was determined as regulator of cars pricing at the time of outrageous fluctuation of foreign exchange in 2011. In 2013, the council presented a formula for prices of cars that is manufactured locally. This formula considered last price of vehicle, inflation rate, improvement or deterioration of quality in compare of last year, and productivity indices. Inflation rate is declared by Central Bank of Iran, quality indices reported by Institute of Standard and Industrial Research of Iran, and pre-assumed 2% for productivity per year. This formula is as follow:
According to this formula, manufacturing cost of carmakers is not mentioned and they can augment their profits by higher sale prices because of quality improvement of their products and cost reduction in manufacturing process. The competition council just determines the ceiling price of products, but if carmakers contravene the rules, they will be punished by judicial system.
This pricing method was not an insufficient model in the unstable economic situation of Iran during the past years due to increment rate USD/IRR, sanctions and other factors, carmakers have looked for increasing their products’ prices which their request were throw down by the competition council. Every year, carmakers send their invoices documentary to the competition council in order to convince the council to increase the prices of their cars, then, the competition council consider not only their invoices, but also other factors such as inflation rate, interest rate, their products’ quality, etc. to make decision how price increment is fair. This method has been used mostly for Iranian carmakers’ products.
Nowadays, the council pass into more doubtful situation after JCPOA, mainly because of importing foreign cars. There is a rule that cars cost more than 45 million Tomans (around 12,000 Dollars) would set apart of the competition council law, as a matter of fact, their price would be determined in the open market, in fact, if there is adequate supplier that prevent from monopoly. According to this law, foreign imported cars have not been included in this law (because most of them are more than 12,000 Dollars). Although the competition council sets this law, it is not out of the mind they interfere in the importing cars’ price, now foreign carmakers confronted high tariffs and taxes imposed by the government. It is crystal clear that it would not be good news for foreign carmakers, they are eager to make business in the open market, anyway, the competition council has not specified its position in this scenario.
Currently, after JCPOA, if the competition council make decision not to control the car price in the market, it would be an interesting news for consumers, due to the future competition between Iranian carmakers and foreign ones, hence, it would be probable that internal carmakers have not only refute the price increment, but are also offering attractive discount to their customers.
All in all, with all this taken into account, it stands reason that non-interference of the competition council would be good news for the foreign carmakers which are interested to take their market share in Iran, as this laissez-faire is the mother of open market, that is why they keep a close eye in this matter. If this happens, not only the foreign carmakers, but also internal consumers will take advantages.