Will the Import Tariff on Cars Increase?

The increase in car imports and the resulting revenues for the government have led to a 5% increase in the car import tariff in the 2017 budget, raising it from an average of 45% to 50%. This move is expected to boost government revenue from car imports to $1.95 billion. According to the 2017 budget proposal, it is anticipated that with the increase in the car import tariff to 50%, government revenue from car imports will exceed $1.5 billion in 2016, given the trend of car imports with an average tariff of 45%. Although this tariff has not yet been approved by the parliament, if it is likely to be approved, the prices of imported cars in the market will increase. According to the latest customs regulations in Iran, cars with engines smaller than 1500 cc are subject to 40% customs duties, those between 1500 and 2000 cc are also subject to 40%, and cars from 2000 to 2500 cc are subject to 55%. Importing cars with engines larger than 2500 cc is prohibited. Additionally, car imports are subject to a 9% value-added tax and a 4% withholding tax. Overall, considering costs such as shipping, tariffs, and various taxes, each imported car is sold in Iran at 70% higher than the global market price. This figure may increase due to the profits of various importing companies or market brokers. For example, the price of a BMW i8, which has a global price of $130,000, reached up to 3 billion tomans upon its initial entry into the Iranian market, eventually decreasing to about 1 billion tomans. This is while this car is hybrid, and according to the 4% tariff for hybrid cars, it should have been sold at a maximum of 40% higher than the global market price in Iran, yet broker manipulation caused its price to rise significantly upon its entry into Iran. Despite the minimum 70% higher prices of imported cars in Iran compared to similar global prices, car imports have increased this year. According to Iranian customs statistics, car imports in the first eight months of this year have grown by 56% compared to the previous year. This statistic indicates that over 41,000 cars worth $1.086 billion have entered the country in the first eight months of this year. It may seem strange, but in the streets of Tehran and some other cities in Iran, such as Tabriz, luxury cars can be seen more than in many cities in Europe, cars that are priced more than double their global prices. In some cases, these prices are shockingly several times higher than their prices in global markets. For example, the Mercedes S500 is traded at 2.8 billion tomans in the Iranian market, or the BMW M6 is priced at over 2 billion tomans. The Porsche Panamera is one of the most expensive cars in the Iranian car market, with second-hand models currently trading at around 700 million tomans. The price of a new model of this car is about 1.4 billion tomans in the Iranian market. The Porsche Panamera is a favorite among wealthy Iranians and has also been the car of many celebrities like Ali Daei. The success of this car in the Iranian market was such that of the 66 units made of the Panamera 4S Middle East edition, 12 were sold in Iran. Maserati is another expensive brand available in the Iranian market, with the Maserati Quattroporte currently trading close to 2 billion tomans. Maserati is a favored brand among wealthy Iranians, to the extent that many of the most famous wealthy Iranians seek to buy Maseratis. The biggest problem for importing luxury cars into Iran remains the prohibition of importing cars with engines larger than 2500 cc. However, in recent years, the hybridization of luxury cars has intensified. Luxury hybrid cars can enter the Iranian market, and with the 4% tariff for hybrid cars, these cars can be priced close to global prices, provided that broker manipulation does not affect their prices as it did with the BMW i8. In the coming years, it is likely that the restriction on engines over 2500 cc will no longer prevent the import of very luxury cars into Iran, as many reputable brands like Porsche and Lamborghini are also designing hybrid versions. Many experts currently believe that the growth of broker millionaires in Iran is one of the factors driving the strong desire to buy luxury cars in Iran under the current harsh economic conditions, as while productive wealthy individuals are under pressure, broker millionaires are in a good position and spend their money on luxury cars, which also have an investment aspect and may even increase in price over time despite usage. Given these conditions and the percentage growth in car imports, it seems that more than 60,000 cars will be imported into Iran this year, valued at over $1.5 billion.