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 used, 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.
Car Prices Start Declining
After the bill allowing the import of used cars was passed by the parliament, automobile prices started declining in the domestic market.
The permission to import used cars under five years old, ratified by lawmakers on Monday, had a dramatic impact, such that the prices of all types of cars have started falling, the head of Iran Auto Dealers Association said.
Saeed Motemani was also quoted as saying by IRNA that in the past few months, car prices had increased incrementally, but with the approval of the bill for importing used cars, as well as positive news about improvement of political ties with neighboring states, prices took a downturn.
“In general, positive news, whether it’s about import liberalization, political issues, etc., affects the prices of capital goods, including cars. In fact, any move to organize the automotive market, even if it is the import of a small number of cars, will have a positive impact,” he said.
The official said Peugeot 207 with manual transmission and glass roof, the price of which had increased to 7.5 billion rials ($15,179) in the past few days, had no customers at 7 billion rials ($14,167).
“When a customer knows that in the near future, cars will be imported [both new and used], prices will fall and the approval of the used car import bill by the parliament was also effective in this regard,” he added.
According to Motemani, after car imports begin in the near future, customs tariffs will also affect the domestic market.
“The improvement of political relations with neighboring countries is also one of those signs that calms investors and causes car prices to decline,” he said.
After the car import announcement, the prices of domestic cars declined by 40-400 million rials ($80-$809) and prices of assembled cars also plunged. For example, the price of Tiggo 8 Pro has declined by 900 million rials ($1,821) in just a day.
