Rising steel prices make cars more expensive? / Is the promise of cheap cars practical?
According to Tejarat News, Seyed Reza Fatemi Amin, since assuming this responsibility, has repeatedly promised to increase the production of car manufacturers and reduce car prices. Experts, however, do not see his promises as practical. In particular, the program of the world’s largest automakers also indicates the possibility of reducing production.
Amir Hassan Kakai, an expert in the automotive industry, believes that neither of these two promises is practical, given the increase in prices and the possible decline in the production of raw materials, including steel.
Expensive dollar and rial raw materials
“The prices of raw materials, including steel, have risen because of the control and reduction of the effects of the corona, and as a result of increased production and demand, as well as the Russia-Ukraine war and rising energy prices,” he told Trade News. This affects the cost of various goods.
Kakai adds: “Now, on the one hand, we are witnessing an increase in the price of raw materials in the world in dollars, and on the other hand, in Iran, the value of the rial against the dollar is decreasing.” This causes double the cost in the domestic dimension. These conditions also affect the price of the car.
Likely to increase the cost of car production from the summer
“In the early months of the year, officials are likely to deny the high prices, but these summer factors are revealing their effects,” said the auto industry expert. Especially at that time, electricity shortages and possible closure of industries could increase the price of steel in Iran.
“About 70 percent of the cost of any car depends on raw materials and related costs,” adds Kakai. Some other industrial costs have also increased this year. As a result, the production of cars commensurate with these cases becomes more expensive.
Accumulated losses and promises to reduce car prices and increase circulation!
But Minister Samat’s orderly pricing and promise to reduce car prices are likely to prevent carmakers from setting prices for their products commensurate with rising production costs.
“Such conditions increase the accumulated losses of automakers,” Kakai said. The promise of reducing car prices is also not practical.
“The government has adjusted this year’s budget to increase production costs by about 40 percent,” he explains. As a result, even with the high cost of raw materials, it is not possible to get a cheap car.
The expert adds: “The Minister of Industry assumes that costs will remain constant and that prices can be reduced by increasing productivity and production circulation.” While costs are not unchanged.
“Given the shortage of electricity and gas, the possibility of reducing steel production in the country and the ability of carmakers, the promise to increase car circulation is also not practical,” says Kakai.
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