Economy, Auto

Iran’s New Industries Minister Not Impressed With Cash For Clunkers Scheme

The new scrappage rule means more money flowing out of the pockets of car buyers.The new scrappage rule means more money flowing out of the pockets of car buyers.

The newly-appointed minister of industries, mining and trade has called for eliminating a rule that obliges domestic automakers to scrap old cars in exchange for new car production.

Mohammad Shariatmadari, who took office this week, has sent his first letter to President Hassan Rouhani asking for reconsideration of the scheme.  "The plan will have a major negative impact on the domestic market and will lead higher prices," Tasnim News Agency quoted the letter as saying.

Shariatmadari warned that if the government insists on the plan it  will definitely result in higher car prices and negatively affect car buyers and dealers.

His letter comes in the wake of a new scheme by the government requiring both auto importers and local manufacturers to contribute to modernizing the ageing transport fleet.

According to the mandate all new locally produced cars are classified in different fuel efficiency ranges, roughly based on the rules in the European Union.

Domestic carmakers, for instance, are obliged to send one old car to the junkyard if they produce vehicles with a fuel consumption of more than 8 liters/100km.

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 government says the new rule will help curb air pollution caused by the gas guzzlers in the major urban areas.

However, the mandate, which is planned to come into effect by the beginning of the next fiscal (March 2018), is likely to be difficult to implement due to the current price of second-hand cars being much higher than what the government offers through its scrappage program.

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