Following the public outcry over illegal car imports often reported in the local media, the Majlis launched an inquiry the results of which were published on Tuesday. In short, the law-making body pushed past considerations aside and said the auto sector is riddled with holes, namely rent-seeking and lawlessness.
According to the report published by Mehr News Agency, the Intelligence Ministry and Islamic Republic of Iran Customs Administration have confirmed the outcome of the parliamentary report.
The probe was led by the Majlis Industries Commission. Though representatives from the Intelligence Ministry did not give a written statement to the commission, they have confirmed “the existence of rent-seeking and other illicit practices” in the lucrative auto sector.
In an oral statement one IRICA representative confirmed “the existence of violations” but did not present any documented evidence.
The legislative report goes on to say that between July 2017 and January 2018 when the website, locally known by its Persian acronym Sabtaresh, which provided importers with permits to bring in foreign vehicles was shut down, “6,481 import permits were issued illegally.”
It called on the ministries of intelligence and industries, IRICA, and the ‘Tazirat’ organization (a judiciary-affiliated ombudsman dealing with trading offenses) to conduct a full-scale investigation, take legal action and report to the public.
Parliament also looked into the steep rise in prices of imported cars before the government banned entry of foreign vehicles.
>Market Status
In recent months and following the introduction of several government initiatives that many say were ill-conceived, imported car prices have gone through the roof and in many cases more than tripled.
After six months of squabbling over the suspension of the online auto import permit registration system, the government passed an amended version of auto import rules late last year and the website was reopened in January.
As per the new rules that many censured as draconian at the time, customs duties on vehicles were increased 15-60% and new restrictions were imposed. For instance, vehicles costing more than $40,000 cannot be imported and sold in Iran. Soon afterward the government banned car imports altogether – a move lawmakers say they will address in the near future.
The Majlis report names several factors that have contributed terribly to the exorbitant price hikes, including government suspending issuance of online auto import permits, sudden increase in the taxes imposed on auto importers, large-scale profiteering of middlemen and dealers, and fraudulent moves by some importers who have concealed 17,000 vehicles. One can only wonder how is it possible to hide such a large number of expensive cars!
According to the report, MPs had called on all the entities, public and private, which might have had knowledge about the matter, to submit their reports. Some of the people and entities which assisted in the investigations were the Head of the Trade Promotion Organization of Iran Mojtaba Khosrotaj, Deputy Industry Minister Mohsen Salehinia, representatives from IRICA, Iran Auto Importers Association, Iran Chamber of Commerce and the powerful Majlis Research Center.
> Stance of Importers’ Association
The association which represents Iranian car importers sent a report to the Majlis commission.
While Parliament in its statement put the number of illegally issued online import permits at 6,481, the association estimates that the real number is closer to 17,000. According to the association, to bring some succor to the chaotic car market, authorities need to address the matter.
Furthermore, auto imports have been named by the government and its supporters as businesses that amplified capital flight in recent years. In its statement the association provides data according to which during the past Iranian fiscal which ended in March, 68,700 cars were brought into the country worth $768 million, respectively indicating a 10.5% and 61.6% decline in imports in terms of volume and value compared to last year.
The statement goes on to criticize local carmakers overreliance on auto parts imports. “Last year the auto parts import bill stood at $3.7 billion,” drawing a parallel in the hope of indicting carmakers’ reliance on foreign suppliers as a greater evil that must be curbed instead of limiting car imports.
Following the introduction of the revised version of car import rules in January, which entailed significant hikes in tariffs, according to the association, companies were hopeful that they would soon be able to resume business. But that was not the case and they face unexpected headwinds that have forced them to increase prices.
Some of the problems listed by the association are as follows: importers cannot bring vehicles into the country based on permits issued since March. Taxes levied on car imports have increased significantly cutting profit margins and discouraging investors.
The association says that the market chaos has encouraged middlemen, profiteers and hoarders out to make easy money.
>Import Ban
The Ministry of Industries, which oversees imports, has also sent its own report to the commission outlining the administration’s position made known on more occasions than one.
Following US President Donald Trump’s decision to pull out of the historic nuclear deal and impose sanctions on Tehran, the value of the rial has plunged to unprecedented lows.
In a move aimed at preserving the country’s already exhausted currency reserves, the government of President Hassan Rouhani introduced drastic measures to curb imports including banning car imports.
The importers’ association in its report calls on lawmakers to push the government to lift the ban. It says allowing imports can and will boost competition to the benefit of car buyers. Lawmakers have said they will order a separate investigation to look into the matter.
