The Majlis Budget Integration Commission has approved the import of 50,000 passenger cars and 10,000 heavy mining and road construction machinery in the next fiscal year (starting March 21, 2022).
According to Jan. 19 approvals, the commission has agreed to allow these imports at a tariff approved by the Cabinet. Proceeds from this issue will be spent on financing the rail network and establishing new railroads, including for regular and high-speed urban trains, and completing semi-finished rail and road construction projects of deprived areas and repairing accident-prone hotspots), ISNA reported.
These undertakings will be ceded to the private sector, including natural and legal persons.
As per the ratification, in the next fiscal year, 50,000 passenger cars and 10,000 mining and road construction machinery, as well as trucks, urban and suburban buses, refrigerated trailers, wagons and refrigerated vans will enter the country at the import tariff rate approved by the Council of Ministers.
Revenues amounting to 600 trillion rials ($2.17 billion) are expected from this source.
“In the commission’s meeting, car import proposal received six votes in favor, which allowed the government to import a limited number of cars with non-export foreign exchange revenues [exchanged at the Nima rate],” Mohammad Reza Mir-Tajeddini, a member of Majlis Budget Integration Commission, was also quoted as saying by Car.ir.
Nima is a secondary market developed by the Central Bank of Iran to be used as a venue where companies sell their export earnings at rates lower than the open market. The currencies sold on Nima will help fund imports.
The most important dispute between the parliament and the Ministry of Industries, Mining and Trade concerns the import of foreign cars. While lawmakers consider the issue of imports as the only appropriate solution in the short term to end the domestic car market’s monopoly and create a balance in foreign car prices, the Ministry of Industries, Mining and Trade does not endorse the issue by citing the scarce forex reserves.
The government is allowed to import 50,000 passenger cars and 10,000 heavy mining and road construction vehicles next year
The parliament passed a motion on Sept. 14 in favor of lifting car imports conditionally.
According to this decision, imports of gasoline, hybrid, electric and compressed natural gas-powered vehicles of specified emission and safety standards are allowed hereafter, with the stipulation that domestically-made vehicles or related parts are exported in return so that no foreign currency is spent on the purchases.
Also, the lawmakers decided that the import of used cars are permitted, as long as they are not older than three years (as of the date of production).
In the past five years, auto imports were banned, reinstated and banned again while a scandal unfolded, in which government officials were accused of facilitating the illicit import of luxury vehicles.
Auto imports have been barred in Iran since June 2018. However, prior to the introduction of the limit, companies had brought cars into Iran, which were in the middle of getting customs clearance when the ban was imposed. Those vehicles have been stuck in the warehouses of customs department, or other state agencies.
However, despite the ban, illegal car imports continued for months. Following a public outcry over the issue, the Iranian Parliament launched an inquiry, which showed that the automotive sector has been riddled with rent-seeking and lawlessness.
Furthermore, most of the imported cars were presold even before entering the country.
Prices of Imported Cars
The prices of foreign vehicles have soared astronomically in the past few years along with the rising foreign exchange rate of the US dollar in the domestic market.
Some foreign cars have recorded a 90% price growth in the domestic market. For instance, the JAC S5 automatic was sold for 900 million rials ($3,249) in the fiscal 2017-18, which has reached 9 billion rials ($32,490) in the current fiscal year’s 10th month (Dec. 21-Jan. 20).
The uptrend in foreign car prices in the last few years, ban on car imports and the lack of brand-new cars in the domestic market adversely impacted foreign car sales. Therefore, automotive experts believe that the market is currently experiencing stagnation.
Even the slight fall in the USD price has not impacted the prices of foreign cars. Perhaps the only way to fix the foreign car market is by removing the car import ban, which can have a significant downward impact on the market.
Given the market instability, imported cars do not have stable prices and depend on the whim of dealers and this has created a huge price bubble. As a result, transactions in the foreign car market have currently reached zero.
Some experts believe that if the car import ban and import tariffs are abolished, the price bubble in the market will certainly burst and prices will experience a downslide.
