Where Does the Corruption of Iranian Automakers Come From?

With the revelation of widespread corruption at SAIPA, which has led to the conviction of the company’s former CEO, the question arises: where does such widespread corruption in the structure of this company originate?

Iranian automaking companies have long held a completely monopolistic and non-competitive market. These companies have managed to infiltrate Iran’s regulatory bodies through various means. On the other hand, in the absence of a free media environment, these companies exert pressure on Iranian media through both legal proceedings and advertising.

Many Iranian media outlets, due to advertising influence, usually refrain from seriously challenging these companies.

Media outlets that do criticize these companies face widespread complaints from them and endure considerable pressure from various organizations.

Many Iranians complain when purchasing vehicles that during registration, access to automotive websites at the time of pre-sales is not available.

It has now become clear that SAIPA, during the sale and pre-sale of vehicles, had completely controlled the distribution of cars only to some of its sales representatives. These sales centers would then place these vehicles in the hands of market brokers.

Gholamhossein Esmaili, spokesman for Iran’s Judiciary, told IRIB: “SAIPA, despite having 600 representatives, distributed its vehicles to only 15 representatives, and 93 percent of this company’s sales occurred through these representatives. Through corruption in SAIPA’s sales and management system, an individual named Vahid Behzadi, along with his wife Najva Lashidaei, managed to pre-purchase 6,700 vehicles.”

In SAIPA’s corruption scandal, managers and some parliament representatives were also implicated.

But has the matter ended here?

Some experts attribute the increase in vehicle prices in Iran to the performance of automakers in vehicle sales. These companies are accused of attempting to increase vehicle prices by reducing supply.

For example, the Tasnim News Agency stated that it has various images showing “automakers’ warehouses remain full of vehicles.”

The news agency continued: “In Shahrivar of last year, following tensions in the vehicle market, Ali Ghased, Tehran’s prosecutor, made a surprise visit to one of SAIPA’s warehouses. In response to claims by company officials that the reason for the months-long deposits of vehicles under the sun was a parts shortage, he asked: if there is a parts shortage, then why are vehicles being produced in the first place to sit for months under the sun?!”

Another case that is considered among the corruption in automakers is the change in certain financial methods to alter profit and loss statements.

Farbad Zawe, an automotive expert, wrote on Twitter: “The bigger charge against Mehdi Jamali, former CEO of SAIPA, is the nominal conversion of losses into capital, which was done in cooperation with the former minister of industry and has not been paid attention to! The Competition Council and Consumer Protection Organization were the perpetrators of these problems and were not tried! The only correct way to increase cash capital is by introducing inflation into financial statements, not converting losses into capital and taking out loans again! Iran Khodro, without any cash injection, increased its capital 20-fold at the end of last year’s fiscal year.”

In recent years, Iranian automaking companies have attempted to cover up the financial losses caused by poor management and Iran’s economic conditions by taking people’s money through pre-sales of vehicles, selling some of the land and properties they own, and taking loans.

Many reports have been published in Iranian media showing that Iranian automakers deliver pre-sold vehicles to customers with delays of several months to several years.

With each pre-sale announcement, these companies absorb significant capital to cover their annual financial losses and pay back some of their previous loans.

Some experts believe these automakers, through warehousing and pressure on the government, are directly attempting to increase factory car prices. Meanwhile, through selective sale of vehicles to some market brokers—which has now been proven in the SAIPA case—they attempt to manage and increase vehicle prices in the free market.

These conditions occur while Iran’s automotive market is monopolistic, and Iran’s situation has prevented foreign companies from being willing to invest in this market. Of course, even during periods when foreign investment is possible, they create various pressures to prevent direct foreign investment from succeeding, to preserve their monopolistic market.

An example of such actions can be seen in Renault’s direct investment in Iran. This investment faced delays due to pressure from SAIPA on Iran’s Organization for Industrial Development and Renewal. The delay lasted so long that the new U.S. administration completely withdrew from the JCPOA, and Renault also left Iran.

Source: Radio Farda