In Iran’s Auto Market: Imported Car Prices Rising

While the online auto import registration system was restored a week ago and the Trade Promotion Organization is of the opinion that car prices will decline, the Head of Iran Auto Importers Association believes otherwise.

In a phone interview with Financial Tribune, Farhad Ehteshamzad said, “The new import tariffs have indeed heightened the already existent chaos in the [foreign car] market. While authorities claim that imported car prices will decline, prices are rising.”

He says his association is lobbing through all possible channels “in the hope that the new import rules will be revised.”

The government passed an amended version of auto import rules on Dec. 30, according to which, depending on engine capacity, import tariffs on gasoline-fueled vehicles have increased 15-40%. Currently, auto import tariffs are between 55-95% — among the highest in the world.

While most governments are offering incentives to promote use of and create interest in hybrids, the customs duty in Iran for hybrid gasoline-electric cars has also increased significantly from 4% to 45-65% depending on the vehicles gasoline engine capacity.

According to the new rules, vehicles costing more than $40,000 are banned from entry. The cap includes the vehicle’s transportation cost.

Ehteshamzad says “the import tariff hike is, among other things, aimed at plugging the holes in the government budget.”

Without playing with words, he says, “The people always pay, and will continue to pay, for the government’s heedless actions. Increase in tariffs translates into one thing: customers need to dig deeper in their pockets to get a decent ride.”

An official at the TPO, Ali Aliabadi Farahani, was quoted at the weekend by ISNA as saying, “The organization expects imported car prices to decline because the amended import rules have been announced and TPO’s online registration website is up and running.”

“Before the new rules were introduced, rumors had it that the government would increase auto import tariffs up to 100%. The new tariffs are lower than what was speculated. Therefore, the prices should come down.”

If the past is anything to go by, the TPO position is something very close to gibberish. Car prices, both domestic-made and imported, have for more than three decades gone only in one direction: upwards.

Ehteshamzad is not the only one who vouches to disagree with the TPO. Since introduction of the new import regulations, almost every market observer and industry analyst has written that the prices will continue to climb.

As soon as the online car import registration website was revived, 1,900 online permits were issued by the TPO. IRICA said during the nine months to Dec. 21, 59,000 vehicles entered Iran worth $1.6 billion.

As per law, after getting auto import permit from the Industries Ministry, local firms must also register online with the TPO separately for every single unit.

 More Hurdles

The Islamic Republic of Iran Customs Administration has issued a new directive for auto imports, which further tightens the noose against car imports.

According to IRICA, import of cars made in 2016 are banned since Jan. 1. Vehicles with engine capacities over 2.5 liters and costing over $40,000 are also banned from entering the Free Trade Zones. For years, the FTZs have had their own regulations and were exempted from such import restrictions. Vehicles imported into the zones cannot be used or sold outside the zones.

Another unwanted problem is that cars registered with the TPO between July 19 (when the online registration system was shutdown) and Dec. 30 cannot be released from customs.

The directive says that cars stuck in the customs and fall in one of the following categories will be seized by authorities: vehicles with engines larger than 2.5 liters or costing above $40,000. Normally, goods seized through such procedures are later auctioned with the proceeds going to the state treasury.

It is believed that the new import tariffs will be applied to cars which are stuck in the customs due to not being registered with TPO before entering Iran. Ehteshamzad quoted IRICA’s representative to the so-called Majlis Article 90 Commission (which handles complaints) as saying, “by December 26, 13,700 cars were stuck in customs.”