Higher Tariffs on Hybrids, Yet Again

EghtesadOnline: The unending saga of hybrid car import tariffs has taken another turn for the worse as the government decided to once again raise the rates by 10%.

News ID: ۷۸۲۸۳۶

03 June 2018

The officials have once again increased the customs duties levied on hybrid cars by 10%, putting forth a cryptic argument that “hybrid vehicles cannot be exempted from the rise in tariffs on gasoline-fueled cars,” reported the Persian economic daily Donya-e-Eqtesad.

This is while the administration had made concessions on hybrid car import tariffs to conciliate the outraged public and a media firestorm which was ignited after a controversial January directive which called for a spike in tariff rates by 65%.

The rates hiked from 5% to 25-65% for hybrids in January and were reduced to 25% in mid-April, according to Financial Tribune.

According to a new directive issued by the Islamic Republic of Iran Customs Administration, the customs duty for hybrids now stands at 35%.

The correspondence made between authorities and published on IRIB News cites a segment of the current year’s budget law, under the title “revenue generated from import tariffs,” which stipulates a rise in the tariff rates for gasoline-fueled vehicles by 10%.

According to a copy of documents published by IRIB, the recent mandate maintains that since hybrid vehicles are both electric and gasoline-fueled, the 10% increase must be applied to them as well.

Topsy-Turvy

The government has swayed back and forth between slashing tariff rates and jacking them up, disrupting private businesses and shoving the auto market into a state of chaos.

The administration suspended auto import rules during the summer of 2017. The hiatus lasted until January when an amended version of auto import regulations was introduced, according to which, import tariffs on hybrid vehicles rose by 25-65% from the previous 5%.

The public, media and environmentalists were furious, launching a barrage of broadside against the decision, accusing the government of abandoning its oft-mentioned green policy to pocket revenues.

The controversy culminated in a lawsuit filed with the Court of Administrative Justice. The court issued an order which was to temporarily suspend the government’s amendment. However the order was never enforced.

But unrelenting pressure propelled the administration to cut tariffs to 25%. While the rates did not fully bounce back to earlier levels but the reduction was welcomed as a win for the environment.

The administration’s latest decision has turned the recent victory into ashes, increasing the customs duty by 10%, inviting more criticism from the public and resulting in another foreseeable hike in prices.

Domestic Hybrids Production Also Hits a Brick Wall

The figures released by the Industries Ministry indicate a slide in the production of CNG hybrid vehicles during the first month of the new Iranian year ending on April 20.

Out of the 76,239 vehicles produced during the period, merely 5.57% are CNG hybrids, marking a substantial decline as the units produced totaled 4,252, marking a 43.9% year-on-year drop. Production of CNG hybrids can be seen as a failed drive in Iran as the quality of the vehicles never satisfied customers, leading to the steep downtrend in their production output.

Carmakers’ decision to transform gasoline-fueled vehicles into hybrid ones made for a bumpy ride for customers used to higher acceleration.

Manufacture of hybrid vehicles was undertaken to curb pollution and improve the environment, a measure that has largely proved a costly failure.

Major carmakers SAIPA and Iran Khodro have four hybrid models on offer, namely hybrid versions of the Peugeot 405, locally designed Samand, Renault’s Logan (locally better known as L90) and the homegrown small city car Tiba.

The hybrid sedans based on the almost three-decade old Peugeot 405 and Samand are infamous for low quality; and several incidents have been reported that the vehicles’ engines or gas tankers have blown up causing damage and casualties and in some cases fatalities.

Outcry

Reza Abbasi, an auto industry expert, talked to Mehr News Agency about the revision, “It seems like the government refuses to seek expert opinion.”

He said the see-sawing policy has deprived the market of the much-needed stability.

“The decision makers are flip-flopping between policies proposed by various factions in corridors of power.”

The latest hike in import tariffs has been recommended by the Plan and Budget Organization. The organization is in charge of planning and supervising the country’s policies on economic and social affairs.

Abbasi described the approach as the manipulation of public opinion and considered it a severe blow to government’s credibility.

Last Ray of Hope

Iranian Parliament is set to discuss and put to the vote a plan aiming to monitor and moderate the country’s turbulent auto market in the coming weeks.

A bill has been proposed which would enable the parliament to monitor and manage the market which has been regarded as the last glimmer of hope for importers and car buyers. If the bill is signed into law, parliament members have pledged that they will return hybrid tariffs to previous levels.

The motion is currently being reviewed in the parliament’s Industries Commission and reports indicate members have not yet reached a consensus.