Gov’t Blamed for Rising Prices of Imported Cars

EghtesadOnline: Prices of imported vehicles have shot up 15% during the past three weeks, Head of Iran Auto Importers Association said.

News ID: ۷۷۸۸۲۱

27 August 2017

According to Farhad Ehteshamzad, the jump in prices is due largely to a recent move by the Rouhani administration.

Two models which have been hit by the wave of the new prices are the imported Kia Cerato and Elentra. Both models are now 50 to 80 million rials ($1,300-2,100) dearer.

Almost a month ago the Ministry of Industries stopped issuing auto import permits for all cars, Financial Tribune reported.

Ehteshamzad told IRIB News “The sudden move by the government has indeed disrupted the market.”

Without the permits local businesses and importers cannot register new orders with foreign carmakers.

As per law, for importing each car, local companies must make an online registration with the ministry.

According to Ehteshamzad, initially the ministry blamed ‘technical problems’ with the website as the reason why new permits could not be  issued.

“However later director of the Trade Promotion Organization (TPO) of Iran, Mojtaba Khosrotaj, said the move was premeditated and is aimed at reducing the trade deficit,” Ehteshamzad said.

Khosrotaj had  said “The online application system will not function until the government issues new guidelines for auto imports.”

The draft of the new rules has been published on the official website of the Cabinet (www.cabinetoffice.ir).

Tougher Conditions

As of Saturday the government had not updated its procedures on the future of car imports.

Its initial clauses are in line with previous guidelines, requiring importers to offer the bare minimum after-sales services, have a representation deal with the foreign carmaker or one of its official distributors.

However, a new clause has been added that is likely to have a significant impact on imports. It obliges auto importers to also invest in local car manufacturing.

The clause reads as follows, “Auto importers have two options, start local production or get into production joint ventures with Iranian carmakers. The total value of imports should not exceed half the value of the importers’ domestic production.”

While Khosrotaj says that the new permits cannot be issued before ratification of the new guidelines, Ehteshamzad disagrees. “Law stipulates that the ministry is obliged to issue permits to anyone who meets the existing legal requirements.”

Ehteshamzad says “Shutting down the online registration system has no legal justification. If the ministry wants to change the guidelines it must follow legal protocols.”

According to rules, before the introduction of a new directive, the government cannot and should not change the existing procedures.

Ehteshamzad believes that the new ruling will further tighten the grip of the two semi-state-owned auto makers, Iran Khodro and SAIPA, on the industry.

Imported vehicles have a 6% share in Iran’s auto market. According to the latest statistics published by Islamic Republic of Iran Customs Administration, 26,608 cars were imported during the first four months of the current fiscal that started in March.