Gov’t Slaps New Tax on Auto Production

President Hassan Rouhani’s government has issued a call requiring local automakers to contribute to modernizing the transportation fleet.

According to the mandate all new locally produced cars are classified in different fuel efficiency ranges, roughly based on the European Union’s system, the Persian-language daily Donya-e-Eqtesad reported.

For each vehicle with fuel consumption over 8 liters per 100 kilometers, the carmaker is required to pay the government 25 million rials ($650). The money is to be used for scrapping old and substandard vehicles.

The ruling will go into effect by the beginning of the next fiscal (March 2018).

Twenty models produced by local carmakers fall in this criterion, including models like Peugeot 405 and Samand along with several Chinese cars produced by Iranian assemblers.

According to Ministry of Industries data, during the first four months of the current fiscal (started in March) 192,429 units of these twomodels were produced.

If production rates of the models do not increase in the future, which is highly unlikely, some 600,000 units of the models will be produced next year. The government will pocket $390 million through the new scheme.

A similar ruling is applied to imported vehicles as well, but the fee the importer is charged for each car varies from $1,300 to $5,200 subject to  fuel consumption rates.

 Scrapping Old Cars

The new mandate is in line with government’s recent moves to consign the old gas-guzzlers to the scrap yard.

Earlier this week Iran’s Transportation and Fuel Management Headquarters said 700,000 old cars will be in the junkyard before the current fiscal is out in March 2018.

According to the organization’s deputy director Alireza Ahmadi “Last year (March 2016-17), 240,000 automobiles were scrapped.”

The official further said at least 1.2 million old cars need to be removed from the streets and sent to the junkyard.

The headquarters, which is affiliated to the Presidential Office, is tasked with devising and overseeing policies related to fuel subsidies, public transportation, fuel conservation and curbing air pollution.