Iran Government Piecemeal Auto Policies Gets a Drubbing

EghtesadOnline: Two legislators, Asadollah Qarekhani and Vali Maleki, have censured the government’s automotive policies, hammering the Ministry of Industries, Mining and Trade for policies that have disrupted business and created more space for an already chaotic market.

News ID: ۷۸۱۹۱۱

25 February 2018

Qarekhani on several occasions has criticized the government for changing auto import rules impulsively. “The government does not have a well-defined strategy for regulating car imports or the auto industry in general. The ministry’s automotive policies simply have no justification or consideration for market demand, public safety and fuel efficiency,” he told ICANA.

The MP recalled that during the past two years the government has raised car import tariffs several times, shut down the online auto import registration website and imposed assorted restrictions on auto imports.  “The Industries Ministry is irresolute about car imports and indulges in  erratic ways,” he said in some of the most blunt criticism of government car policy, both internal and those related to imports.

What the lawmaker is openly condemning as unwanted and unhelpful, and government bodies switching auto import rules unabashedly, is nothing new. There are scores of examples in the past reflecting how the imported car market is subject to brutal disruptions at short intervals, according to Financial Tribune.

For instance, the online auto import registration website locally known as Sabtaresh has been shut down several times. As per law, after getting an auto import permit from the Ministry of Industries, local firms must also separately register online with the Trade Promotion Organization  for every single unit. The online service was shut down twice in 2017. One can only imagine what did to the imported car market and the insatiable appetite of greedy car dealers and the army of middlemen trying to make a fast buck.

Furthermore, Qarekhani, the lawmaker from Aliabad in Golestan Province, is of the opinion that local automakers through their powerful lobbies have gotten into the habit of pushing the government to impose  exorbitant tariffs on imported cars and in the process remove any semblance of competition from the local market.

In late 2017, the government passed an amended version of auto import rules, according to which, depending on engine capacity, import tariffs on gasoline-fueled vehicles increased between 15-40%. Customs duty for hybrids was increased from 5% to 15-65% -- a move unseen or unreported in countries from Afghanistan to Morocco.

“While most governments around the globe are offering incentives to promote the use of hybrids, local carmakers’ lobbies do all they can to force the government to impose prohibitive tariffs on hybrids,” he said in the latest attack on stringent rules that are seen as part of the auto industry problem not the solution.

>Insider Information

MP Maleki is also known for often scolding the government for the pattern of hikes in auto import tariffs.

The lawmaker from Meshkin Shahr, Ardebil Province, said the volatility created by the government’s haphazard moves lead to pretexts for importers and avaricious dealers to jack up prices as they wish with absolutely no oversight nor any judge or jury to refer to restore the rights of car buyers. Maleki revealed that “Shutting down Sabtaresh (the auto registration online website) last summer caused a 50% increase in prices of imported cars.”

He adds that the sudden changes have made many question the transparency and the intention of government policies and those who advise it on important foreign trade and economic matters.

Many legislators say that using insider information and the benefits of cronyism, selected auto importers have made fortunes from the volatile import rules and the chaotic market over the past several years.

According to reports by the Majlis Research Center, Majlis Article 90 Commission (which handles complaints) and the General Inspection Organization of Iran, some car importers made millions of dollars in windfall profits by mauling the uncertain market situation and using insider information,

Echoing his colleague’s position, Qarekhani says, “The government’s sudden move to shut down Sabtaresh has further strengthened suspicions about insider information and nepotism. Shutting down the website disrupted the market and created the conditions in which some made millions of dollars” by selling foreign cars at inflated prices.

>Hubristic Carmakers

Vehicles produced by Iranian carmakers have often been censured for blatantly flouting even the minimum standards, disregarding safety rules, poor mileage and injecting poison into the air. To make matters worse, the local carmakers have always turned a deaf ear to criticism from the people. Qarekhani says, “Local carmakers have no regard for such issues. Forget about (higher) global auto standards, cars manufactured in Iran do not even comply with local standards!”

He said, “Whenever carmakers are singled out for poor quality, their representatives and senior managers rush to claim that many jobs would be lost if production of the substandard cars is halted.”

However, they always forget to mention that even for the production of  substandard vehicles they are overtly reliant on Chinese auto parts and  suppliers, he recalled. “They always fail to mention that jobs they (carmakers) are talking about would be threatened in China, not Iran!”

To expose the gravity of the problems inflicting the local car industry,  Qarekhani asked, “How long should we wait until a decent car rolls out of Iranian plants? How many years? A huge market has been handed to these carmakers and they have been provided with every possible incentive, but what is the outcome?”

Both legislators were of the strong opinion that the only way out of the unacceptable situation is privatization.

Maleki says, “

“So long as the government continues to appoint incompetent managers at the helm of local car manufacturing companies nothing will change for the better,” the people’s representative from Meshkin Shahr lamented.