Economy cars are a priority 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 analyst, said as per import 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 analyst 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 costs, about 120-140% will be added to the final price.”
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 [$21,037].”
Calculating the final price of imported vehicles worth €20,000 in IME, the analyst 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 released 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 will not be included in the economy car category,” he said.
Car Importers Deterred by Unspecified Tariffs, Sales Model
Several prospective companies have withdrawn from the race to import cars because of unspecified tariffs and mechanism for selling the cars via IME.
While automotive experts and players believe that it is not possible to import cars by the end of the year, the possible entry of brands such as Toyota, Mitsubishi, Datsun, Hyundai, Kia and Changan into the Iranian market has been touted by the officials of the Ministry of Industries, Mining and Trade.
Many market players, who had earlier registered for importing cars, have withdrawn from the scheme to import 70,000 cars over lack of clarity regarding the tariff and mode of sale through the Iran Mercantile Exchange.
Ali Qanbari, an economist and a member of the Faculty of Economics of Tarbiat Modares University, noted that the determination of the price of imported cars in IME is a requirement, but it has not yet been finalized due to a lack of interaction between the parties concerned, Donyaye Khodro reported.
“Due to the lack of financial literacy and the conflict of interests between importers and IME, it is necessary to determine the tariff rates and customs fees before importing the cars,” he added.
Commenting on the sale of domestic cars via IME, he said although the stock exchange organization has mechanisms in place for selling cars, officials are using a trial and error method to undertake this sale. Like other experts, Qanbari insisted that holding lotteries for selling cars and using command pricing must be halted, “but we are still waiting for a solution in this regard.”
The economist noted that in addition to solving the pricing problem, the reform of financial structure and reduction of government ownership in the automotive sector should also be pursued.
He added that although the privatization of large automobile factories has been the focus of most countries, the Iranian government has not shown the necessary determination in this field.
Qanbari said car import had been suspended for a long time by the Industries Ministry, but presently only the import of cars from France remains prohibited. He added that the delay in car imports has made applicants wary of the final result of importing 70,000 cars.
“The Industries Ministry initially announced receiving 24 requests for car import, and later said seven companies were eligible to register car import orders, which figure was increased to 12 companies. However, a large number of car import applicants on this list are domestic carmakers or their subsidiaries, as well as private car assemblers,” he said.
“In the past, official representatives of companies used letters of credit and usance to buy from foreign car companies, but these conditions do not exist for new companies. Buyers should not be promised the import of cars of brands such as Toyota, Mitsubishi and Datsun, because these companies cannot sign new contracts with other Iranian companies as they already have exclusive agency contract with established importers in Iran.”
Qanbari pointed out that some of the selected importers have introduced their target brands, even though the exact details of car import remain uncertain.
“There have been rumors of importing from intermediate countries instead of the main countries of origin, which is apparently a serious lapse. It has been reported that other than Chinese products, the rest of the products will be imported indirectly from third parties,” he said.
