Owning a Car Gets More Expensive in Chaotic Market

EghtesadOnline: Iran’s midrange auto sector is seeing sudden hike in prices of locally produced and assembled models soon after prices of imported vehicles jumped over the past few months.

News ID: ۷۸۰۱۴۱

29 October 2017

According to the head of the Competition Council, Reza Shiva, “The prices of several locally assembled models have shot up by 70 million rials ($1,750),” the Persian-language newspaper Donya-e-Eqtesad reported.

The so-called Competition Council is a government body which sets the price for locally- produced/assembled vehicles under 500 million rials ($12,500).

Several models with price tags between 500 to 900 million rials ($12,500 to $22,500) like SAIPA’s Kia Cerato, Hyundai i20 assembled by Kerman Khodro and Mazda3 sedan assembled by Bahman Group have seen 30 to 70 million rials ($750-$1,750) increase in prices in the past few weeks, according to Financial Tribune.

For instance, Cerato is now offered for 1.04 billion rials ($26,000) -- 50 million rials ($1,250) costlier compared to mid-summer.

While the council does not have a mandate to take any practical measure against the rising prices, Shiva says the government should take action to address the issue.

According to market observers, shortages in the imported car market due to new and complex government regulations have had a domino effect on the locally manufactured/ assembled car sector.

It has almost been four months since the Trade Promotion Organization of Iran stopped issuing new permits for car imports under the pretext that the rules guiding the business are old and worthless and need to be rewritten.

TPO Defiant

Importers are required to receive online permits from TPO before bringing cars into Iran. TPO Chief Mojtaba Khosrotaj has been defiant and says “The online registration system will not be up and running until the government issues new guidelines for auto imports.”

The import ban has given rise to chaos in the market leading to the usual jump in car prices. For example, in the past four months several imported Kia models including Optima and Sorento have become dearer by 50-120 million rials ($1,250-$3,000).

The move by TPO has been strongly criticized by the private sector as unwanted, unhelpful and disruptive. While Khosrotaj insists that the new permits cannot be issued before ratification of new rules, the head of Iran Auto Importers Association, Farhad Ehteshamzad disagrees. “Law stipulates that the Ministry of Industries and TPO are obliged to issue permits to anyone who meets the existing legal requirements.”

Publicly castigating the TPO’s practices, he 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 law, before the introduction of any new directive the government cannot and should not change or suspend existing procedures.

While importers, dealers, and authorities squabble, it is the consumers who normally pay the price for the mistakes and questionable decisions of those in higher places.