Car Importers in Iran Nervous About Anticipated Rules

New import regulations can give an oligopoly to local car makers
Hyundai may be barred from future imports under the proposed guidelines.Hyundai may be barred from future imports under the proposed guidelines.
Importers claim it does not make economic sense to manufacture imported cars inside Iran

Following a new set of regulations by the Ministry of Industries, Mining and Trade, the end could possibly be near for the activities of Iranian car importers.

The new guideline for car imports was finalized in March and is currently under review by a special presidential committee for market regulation.

The regulations are set to be sent to the Cabinet for final approval. However, with the implementation of the new rules  some stakeholders and pundits say that the activities of almost all Iranian companies currently importing cars could be a thing of the past, reported.

In 2015 the ministry decided to introduce new regulations for car imports with the intent to boost local industries and curb  large imports of finished vehicles.

One of the articles of the new guideline stipulates that if a certain brand is being manufactured inside Iran, that brand cannot be imported by any other independent vehicle importer. In other words, only the company manufacturing the car is allowed to import cars from the parent company.

Auto manufacturers in the country are producing a number of models which at the same time are also imported by other firms.

The first and second largest carmakers, Iran Khodro Company and SAIPA, both manufacture Renault cars while the latter company is also making Kias. Furthermore, Kerman Motor Company is in talks with Korea’s Hyundai to restart manufacturing selected models.

With the implementation of the new regulations, the activities of Iranian auto companies such as Asan Motor (importing Hyundai), Atlas Khodro (importing Kia) and Negin Khodro (importing Renault) would stop while SAIPA, IKCO and Kerman Motor Company will become the exclusive importers of the brands they manufacture.

Furthermore, one article in the guideline notes that auto importers can continue imports under the condition that they commit to manufacturing some models inside Iran or export cars and spare parts manufactured inside Iran.

The article specifies that 20% of the cars should be produced locally. Furthermore, the total value of all the cars imported should be no more than half the total value of all the cars manufactured by that company.

Import of cars has been a lucrative business (albeit for a selected few) in Iran since forever, both before and after the revolution in 1979.

Small wonder the proposed new rules have been strongly censured by car importers. Farhad Ehteshamzad the head of Iran’s Vehicle Importers Association says the conditions put forth by the government are almost impossible to meet for many reasons.

“It is not economically feasible to manufacture most imported cars inside Iran. Only a limited number is imported and it is downright impossible to export locally-manufactured cars,” the disconcerted official said.

The Financial Tribune reported on December 15 that data released by the Islamic Republic of Iran Custom Administration shows auto exports were meager during the first eight months of the current fiscal year (started in March).

During the period, companies hardly exported 3,298 vehicles worth $19.8 million. The number of cars shipped fell 86.5% compared to the same period last year when 24,500 units were shipped to foreign markets.    

Ehteshamzad added that such measures will only “cut out the car importers from the market and benefit local manufacturers.”

“The market will be completely monopolized by local carmakers while the government will be able to further tighten its grip on the auto market.”

He went on to say that even though the guidelines seek to promote customers’ rights “there are more than just a few faults in the proposed regulations, and it also does not factor in trade realities.”

Ehteshamzad opined that the private sector had not been consulted in the preparation of the draft and the government is visibly unfamiliar with the business environment. “This is yet another reason why the new regulations will not be of any benefit.”

Market observers approach both the new rules and the views of the car importer with a pinch of salt for more reasons than one. Firstly, the two domestic carmakers already have an ironclad grip on the huge auto market. It hardly matters for the government(s) that their products are very close to useless with low quality and high prices.

Second, the price of foreign cars in Iran is the highest in the region and probably the world, thanks to the high tariffs imposed by the government. The car import business is an important source of income for the state and government and it is highly unlikely that they will take a saw to the branch they are sitting on.

Last but not the least, car import permits are not granted to all those who seek it. It was, is, and will be the function of a tiny  minority with money and very close links to vested interests.

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