The Majlis Joint Commission has approved the import of used vehicles, including passenger cars, tractors, trucks, vans, buses and minibuses, under 5-8 years in the next fiscal year (starting March 21, 2023).
The proposal, incorporated in the section on automotive development in Note 6 of the budget bill, was earlier approved by the Majlis Industries and Mines Commission.
This issue will be officially approved when the articles of the budget bill for the fiscal 2023-24 are presented in an open session of the parliament, Donyaye Khodro reported.
Some experts claim that the import of used vehicles can help regulate the market while others oppose this plan and believe that used cars are not economically viable, because the country of origin wants to export them for the same reason.
According to Hassan Qazian, an automotive expert who supports the plan, the import of used cars can help reduce prices only if brokers and profiteers are eliminated.
“The domestic car market has been awaiting the arrival of newer models of foreign cars for several years. But since the USD rate has exceeded 400,000 rials and the amount of taxes, customs duties, etc. have increased, imported new foreign cars cannot cost less than 10 billion rials [$25,000] under the current conditions. This figure has been estimated by considering the lowest possible prices and costs; therefore, new cars with higher prices will cost more in the domestic market,” he said.
“This is while used cars in a good condition can be bought at lower prices. Based on this, the import of foreign used cars in good condition can greatly reduce the price range of imported cars.”
The expert noted that brand new cars cost upwards of $20,000, but can be imported for under $10,000 as used vehicles.
“The import of these vehicles can help reduce prices in the domestic market only when the import of passenger cars is not handled in the same way as the import of used trucks, which was supposed to facilitate the purchase of a used truck for people who had a dilapidated truck and could not afford a new truck. But due to the presence of brokers and profiteers, and the lack of proper planning and management, imported used trucks are currently priced higher than new domestic vehicles,” he said.
Qazian said in the absence of proper management, the import of used passenger cars is pointless.
“If we are going to import used cars without a plan and without a law or legal framework, the import will not affect the market and importers may simply waste their money,” he said.
“However, if the rules and regulations for the import of used cars are clear from the beginning and there is coordination between all related organizations, the car market will definitely benefit from it and we will witness a decline in prices.”
Imported Vehicles Will Not Belong to ‘Economy’ Class
Economy cars have been prioritized for imports, but in case costlier cars are imported, they will be subjected to the luxury car tax, the Ministry of Industries, Mines and Agriculture has announced.
However, given the fact that the final price of imported cars will be 120-140% higher than the initial price and they will be subjected to the luxury car tax, it becomes obvious that none of the imported cars would be considered an economy car.
In an interview with Donyaye Khodro, Morteza Afqeh, an economic expert, said as per regulations, the import of cars with a maximum price of €20,000 are permitted, although those priced under €10,000 are considered economy cars and enjoy import priority.
“It will be Iran Mercantile Exchange’s responsibility to set the prices of imported cars,” he added.
Asked about the profit margin of these cars, the expert said, “According to the directives of the Industries Ministry, imported cars will enter IME with a 15% profit added to the final price. Therefore, the base price of imported vehicles can be estimated. Of course, other costs such as tariffs, car scrap and logistic fees will also be added. With these expensess, the final price will rise by about 120-140%.”
Commenting on the final price of imported vehicles costing less than €10,000, Afqeh said, “A car valued at €10,000 at the Nima rate of each euro priced at 296,290 rials will amount to 2.92 billion rials [$7,845]. Now, if we consider the average final price to be 130% higher, it will reach 6.81 billion rials [$18,296]. By taking into account the 15% commercial profit, the car’s price in IME will be approximately 7.83 billion rials [$21,037].”
Calculating the final price of imported vehicles worth €20,000 in IME, the expert said, “According to the price limit set for car imports, a €20,000 vehicle based on the Nima foreign exchange rate will be priced at 5.92 billion rials [$15,905] and the total price, including insurance costs, freight, customs duties, etc., will amount to 13.62 billion rials [$36,693]. Therefore, this car will probably go to IME with a base price of 15.67 billion rials [$42,101] and the profit determined for this car will be 2.35 billion rials [$6,313].”
Afqeh noted that the impact of car imports will become evident when these products are sold in the domestic market.
“The expectations of buyers who have the financial ability to purchase products worth more than 15 billion rials [$40,300] should be checked, because these cars do not belong to the economy car category,” he said.
