Problems related to foreign exchange allocation are the main hurdle to the import of used cars, according to the former spokesperson for the Ministry of Industries, Mining and Trade.
Omid Qalibaf also told the Persian automobile daily Donyaye Khodro that the import of used cars will take place, if the required forex is allocated by the Central Bank of Iran.
However, much remains to be done in terms of procedures before used cars could be imported.
“The Majlis ratification can be implemented with the approval of the Guardians Council and the State Expediency Council. The next step is to announce the law to the government, prepare executive regulations and finally notify the Ministry of Industries, Mining and Trade for implementing it, which will take time. So it is unlikely that this will materialize in the next two months,” he said.
The former Industries Ministry spokesperson said obtaining permits from the Department of Environment and the Institute of Standards and Industrial Research of Iran is also problematic.
“Therefore, the import of used cars will not be easy, assuming that the currency and sanctions situation in the country remains the same, but it is possible,” he said.
Referring to the impact of this law on the car market, Qalibaf said, “The important issue is how the executive regulations are devised. If real buyers are allowed to import cars without a commercial card, as it was previously stated in the draft proposed by the Industries Ministry, we could be optimistic about the regulatory effect of this law.”
The approval of the law to import used cars had made people optimistic about a fall in car prices.
“But if strict regulations are set, the law itself will become an obstacle to its implementation. In any case, the psychological impact of the law was apparent in the last two or three days with the decline in the prices of used foreign cars,” he said.
Qalibaf stated that if these obstacles are not taken care of, it could again lead to a price hike.
Asked why the import of used cars did not materialize when it was raised last year, he said, “Last year, there was a good resolution regarding the import of used cars from free zones, but it was rejected by the State Expediency Council.”
Outcome of Car Imports Unclear
While some experts believe car imports will help reduce prices in the domestic market, others believe they will have the opposite effect.
After car prices peaked in the last two months, the prices of some domestic and imported cars have fallen by up to 20% following the drop in foreign exchange rate.
Asked if the downtrend will continue, Mohammad Farahabadi, an economic expert, said one of the important automotive news is that car import tariffs are going to increase from 20% to 171% for engine volumes of 1,000 cc to 3,000 cc, the Persian automotive daily Donyaye Khodro reported.
“Cars that were not allowed to be sold in the domestic market last year will soon enter the market. Contrary to people’s adverse opinions about tariffs, car imports will reduce the current rates even with a 170% tariff,” he added.
The expert noted that with the import of used cars with a maximum age of five years, car prices will change considerably.
“For example, the 2023 Toyota RAV4 in the UAE is priced at 120,000 dirhams which, including 135% of the tariff and 15% of the importer's profit, will be priced at 41 billion rials [$82,979]. The 2018 model of this car that has run 40,000 kilometers is also priced at 80,000 dirhams in the UAE which, including the 135% tariff and 15% importer's profit, will be priced at 27 billion rials [$54,644]. This shows that the price of imported cars will decrease significantly,” he said.
This is while Amirhossein Kakaei, an automotive expert, believes that car imports will increase the prices in the domestic market.
“The main issue is whether used cars will actually enter the country. The fact is that the main reason for banning car imports in the last five years was due to the lack of foreign exchange. Even last year, when the government and the parliament lifted the ban on car imports, new cars did not arrive due to the lack of forex and also because most reputable companies in the world do not work with Iran [because of sanctions and money transfer problems],” he said.
“If, according to the officials, one million cars are going to be imported, even at the lowest car price of $10,000, an outlay of $10 billion is needed for car imports. This will raise forex demand in a country that continues to grapple with currency supply. If government revenues do not increase, it means more forex resources will be needed, which will increase foreign exchange rates.”
Kakaei believes that car prices could decline in the short run, but in the long run, car imports will definitely increase their prices unless the government reaches an agreement over its nuclear program and its forex earnings grow.
“We are currently facing shortages in industries such as pharmaceuticals, animal husbandry, poultry, etc., which require foreign exchange. Supporting these industries has a higher priority. When they receive the necessary support, the automobile industry will be next [to receive forex allocation],” he said.
