Jump in Imported Car Prices Unavoidable

EghtesadOnline: Cumbersome regulations imposed by the government on the one hand and unbridled prices charged by voracious auto importers on the other are set to impose new costs on customers.

News ID: ۷۷۸۳۱۱

13 August 2017

Last winter authorities in Tehran introduced a rule banning gray car importers. The ruling came into effect two weeks ago.

Gray imports of vehicles are new or used motor vehicles and motorcycles legally imported from another country through channels other than the manufacturer’s official distribution system.

Furthermore, the ruling obliges car importers to have a direct deal with the manufacturer. Several businesses have been able to get import permits from the Ministry of Industries, Mining, and Trade, while they have never been accepted or acknowledged by the foreign carmaker as partner or representative, according to Financial Tribune.

Government officials claim that the move aims to protect consumer rights, whereas so far it has only deprived the market of almost half the resources and channels used for auto import that will certainly lead to a significant rise in the price of foreign cars.

Dodging Rules

The outrageously high profit margin in the sector plus gray importers vested interests have made businesses reluctant to forsake their share of the market, and they have devised a new mechanism to evade rules and continue making fat profits.

According to a recent report by Financial Tribune’s sister newspaper Donya-e-Eqtesad, the ‘“official representatives’ have started selling their rights to bring cars to  gray importers.

The permits alone cost gray importers between 250 to 450 million rials ($6,500 to $11,800) per car. This new recycled business is packaged and sold as ‘partnership agreements.’

The procedure is set to have a significant impact on the imported vehicles market with market observers saying that prices will jump at least by 10% in the coming months.

Earlier the head of Iran’s Auto Importers Association, Farhad Ehteshamzad told Financial Tribune “During the last fiscal year that ended in March, close to 50% of the cars entering Iran were imported by gray importers.”

The latest data released by Islamic Republic of Iran Customs Administration (IRICA) states data during the first four months of the current fiscal 26,608 cars were imported at a total cost of $752 million.

If import rates do not jump in the next few months and gray importers try to hang on their 50% share of the market, “official importers” will pocket $490 million through the so-called partnership agreements.