After Iran opened the door to importing used cars, what is the future of local vehicles?

TEHRAN -

 Less than a month after the arrival of the first shipment of foreign cars to Iranian territory, the Parliamentary Industries and Mines Committee approved a draft resolution to import used cars, within the framework of the government's policy aimed at "adjusting markets and the competitiveness of the auto industry."

And last May, the Iranian authorities lifted the ban imposed by the previous government - about 5 years ago - on imports of foreign cars in order to save hard currency, and in response to the exit of foreign companies from the republic after the return of US sanctions in 2018.

Contrary to what was expected, the Iranian market received foreign cars with an increase, in an indication of the thirst of the local market and the inability of the last step to meet the growing demand for passenger cars, which paved the way for Parliament’s approval of importing used vehicles, but the step raised many questions about the new mechanism and its ability. To control prices and funding sources, in light of the financial sanctions imposed on the Iranian economy.

Why did Tehran resort to importing foreign cars?

The history of importing cars in Persia dates back to 123 years ago, during the era of King Muzaffar al-Din Shah (1896-1907), the fifth sultan of the Qarjar dynasty.

During the second Balhawi era, the "Iran National" company - whose name changed to "Iran Khodro" after the 1979 revolution - was able to produce its first car, the Peykan, in 1967. Since then, car prices have continued to rise, and successive government policies have not succeeded in controlling them.

In addition to the continued flow of foreign cars into the country, the Iranian authorities, during the war with Iraq (1980-1988), allowed the import of used cars, but quickly announced their failure and banned imports of used vehicles.

After the previous US administration withdrew from the nuclear agreement and the return of foreign sanctions on the Iranian economy, the previous government took a decision in 2018 to ban the import of 1,339 commodities, including cars, within the framework of the policy of the economy of resistance and the provision of hard currency, which doubled the demand for domestic production.

Following the severe shortage in supply and the increase in prices in the car market in line with foreign models, the current Iranian government found in imports an option to balance supply and demand, adjust prices and raise competitiveness in a sector that has been suffering from declining quality for decades.

Why did the government retract the ban on importing used cars?

Where do you import from?

When announcing the lifting of the ban on imports of foreign cars, Minister of Industry, Mines and Trade Reza Fatemi Amin confirmed, at first, that the government decision would not include imports of used cars.

However, after parliament approved their import, a spokesman for the Ministry of Industry, Mines and Trade, Omid Qalibaf, confirmed that used cars will be imported next Iranian year (starting on March 21) exclusively through free zones.

Most of the free zones are located in the southern governorates overlooking the Gulf waters. Over the past decades, traders have been importing various models of foreign cars from the Gulf countries, especially the Emirates and the Sultanate of Oman, through the free zones nearby.

In the meantime, the newspaper "Jewan" reported that ships loaded with used cars had docked in the port of Bushehr during the past few days, and expected them to enter Iranian territory during the coming period.

The Industries and Mines Committee of the Iranian Parliament approved the import of used cars whose manufacturing date does not exceed 8 years prior to the date of import, and whose age is not less than 5 years.

The parliamentary committee said in a statement that it allows the government to import used cars starting from the next Iranian year, in order to relieve pressure on the growing demand for local cars, adjust prices that are rising, support the public transport sector, reduce the volume of fuel consumed, and help solve the pollution crisis. weather, and reduce traffic events.

For its part, the Car Importers Association announced its support for the Parliamentary Industry and Mines Committee in its approval of the draft decision to import used cars, describing the step as being in the interest of the people, and will lead to a significant decline in vehicle prices.

Why did the move raise opposition from some Iranian circles?

Ahmed Nemat Bakhsh, Secretary of the Automobile Manufacturers Association, describes used cars as having high fuel consumption, and that they need continuous maintenance and replacement of many spare parts, in addition to their negative repercussions on the phenomenon of environmental pollution, which makes them “uneconomical”, not to mention that some local cars Cheaper than used foreign counterparts.

Speaking to Al-Jazeera Net, Iranian economist Dr. Hossein Raghfer criticizes the authorities' approval of importing foreign cars, especially used ones, in light of the economic blockade imposed on the country and the difficulties of entering export revenues.

He added that allowing local car manufacturers to import foreign vehicles will divert their energies towards trade, and that most private sector companies have already turned into workshops for assembling foreign cars.

Iran Khodro and Saipa are among the largest car manufacturers in the republic, and they have been allowed to import foreign cars.

They produce about 90% of the country's total vehicles, and the state owns between 14 and 16% of the shares of the two companies.

There are also many other companies within the private sector, including "Pars Khodro", "Kerman Moto", "Zamiad", "Bahman" and "Modiran Khodro", which pour most of their energies into assembling foreign cars, especially Chinese ones.

The auto industry in Iran accounts for 3.5% of the gross national product, according to the latest statistics published by the semi-official Fars News Agency.

Iranian economist Dr. Ragfar: The national wealth, foremost of which is oil revenues, will be the first victim of the car import policy (Iranian press)

How do you finance imported car deals?

On the official level, last May, Parliament enacted a law obligating the central bank to provide one billion euros for the import of foreign cars in the first stage, and the government proposed two billion dollars for this purpose in the next year’s budget (which will start on March 21).

Dr. Raghfer returns and says that the national wealth, foremost of which is oil revenues, will be the first victim of the car import policy, explaining that there are Iranian assets frozen in a number of foreign countries, including China and South Korea, which will be bartered with cars imported from those countries.

And he continued that - in addition to the frozen oil revenues abroad - some other companies are facing very great difficulties in returning the revenues of their exports to the country to be used to finance imported car deals, provided that those amounts are paid as a result of the sale of imports inside.

Although there are no unified statistics on the number of workers in the automotive sector in Iran, some media outlets talk about one million workers and employees working directly and indirectly in the government and private sectors.