Soaring Car Prices Impede Taxi Renovation Program

EghtesadOnline: The government's decades-old taxi renovation program has been hampered by rising car prices in Iran, as only 9,000 dilapidated taxis were replaced with new cars in the last Iranian year (ended March 20, 2021).

News ID: ۷۸۶۴۴۳

11 May 2021

“Since the scheme was announced in 2016, car prices surged by 150% through a periodical increase, which has slowed the renovation process,” Morteza Zameni, the head of Iran Taxi Union, told YJC.

Four years ago, the government, in partnership with local banks and automakers, proposed the taxi renovation program that had some promising outcomes for cabbies despite flaws.

The plan is still being executed, he added, announcing that the union has called on the Ministry of Industries, Mining and Trade to do its fair share and help renovate the aging cabs.

Zameni urged the government to allocate loans to taxi owners keen on renovating their vehicles, as taxi drivers cannot afford to buy new vehicles at the current market price.

The sedan called Samand made by Iran Khodro – one of the popular cars in the local taxi fleet – now costs 1.16 billion rials ($5,306). The same car would not fetch 370 million rials ($1,681) a couple of years ago.

Another sedan favored by taxi drivers is Peugeot 405. Currently, the CNG-hybrid 405 costs up to 1.07 billion rials ($4,884). In 2018, it could be bought for 330 million ($1,500).

The cheapest vehicle in Iran today is SAIPA’s Tiba at 870 million rials ($3,990), up from 220 million rials ($1,000) some three years ago.

Dilapidated Fleet

The taxi fleet has long been in dire need of renovation. There are 150,000 old and dilapidated taxis worsening air pollution in major urban areas. The figure comprises nearly half the total 360,000 vehicles in the taxi fleet.

If effective measures are not taken, Zameni said, the number of dilapidated cabs will jump to 245,000 in a year.

To address the problem of deteriorating air pollution in most metropolises, the government introduced the latest renovation scheme.

To be eligible, cabbies were required to register their clunkers on the website Nosazi.org. After enrollment, each driver had to dispatch the old car to the scrapyard. Applicants were loaned 200 million rials ($900) with an interest rate of 16%. The money was to be repaid in 48 monthly installments.

After the loan amount was reduced from the total price of the new vehicle, the driver paid the balance upfront. With car prices rising as never before, most drivers cannot afford to participate in the scheme. There have been reports that the loan amount is to be increased. How this will help remains to be seen.

Those who devised the 2016 taxi renovation scheme are often censured by taxi drivers. Besides complaining about annoying delays in delivery schedules, many at that time said they could not afford the car prices despite the loan.

Renewal of Commercial Vehicles

In line with the renovation of Iran’s commercial fleet, the Ministry of Industries plans to renew 12,000 vehicles plying on intercity and urban routes by the end of the current Iranian year (March 2022).

The plan is part of a larger scheme to renovate 176,500 commercial vehicles, including 68,500 buses and minibuses, as well as 108,000 trucks, within three years.

The initiative is to be implemented by the ministry's subsidiary institutions, the Industrial Development and Renovation Organization of Iran, as well as automotive and parts manufacturers.

According to Behzad Etemadi, the scheme was ratified by the Cabinet in 2017, but it did not gain momentum until the present.

“The plan is subsidized by the government to the tune of 50% of vehicle prices. The scheme’s organizers have also signed agreements with local banks to offer vehicle owners cheap loans for meeting a part of the expenses through loans,” he said, adding that applicants will have to pay 20% of the vehicle’s price upfront.

According to Etemadi, the new vehicles featured in the renovation program will be manufactured by 17 domestic companies, while engines, gearboxes and axles will be imported.