Iran's used car import window narrows: vehicle age is locked for 3-5 years +20,000 vehicle quota

According to information released by the Iranian Comprehensive Trade System on September 19, Iran once again clarified the conditions for import registration of used passenger cars: According to Article 11 of the Automobile Industry Reorganization Law, the age of used cars applying for import registration must be "more than 3 years and less than 5 years"...

According to information released by the Iranian Comprehensive Trade System (م ا م ا ل م م ا ل ا لAccording to the access scope corresponding to the Iranian calendar year 1405, the models that can actually apply for import registration are currently limited to model years 2021, 2022 and 2023.

For China used car exporters, this regulation is particularly worthy of attention. This means that although Iran has reopened the import channel for used passenger cars, not all common export vehicles of the age can enter. Before purchasing, locking and shipping, exporting companies must first confirm whether the model year falls into the current access window.

Greater uncertainty comes from exchange rates. After the Iranian parliament announced on August 20 that it would liberalize the import of used cars, in just one month, the local free market dollar exchange rate has risen by more than 21%.

Imports of used cars are reopened, with an annual cap of 20,000 vehicles

According to Boursenews previously reported, Farshad Ebrahimpour, a member of the presidium of the Iranian Parliament, said on August 20 that the import of used passenger cars with a age of 3-5 years that had been previously restricted had been liberalized, and the import limit of passenger cars in Iran's 1405 calendar year was set at 20,000 vehicles.

The policy goals given by Iran are relatively clear: to promote competition in the automobile market by increasing imports, enrich vehicle choices, and help stabilize domestic automobile prices.

However, the new caliber announced by Iran's Comprehensive Trading System on September 19 further refined the age conditions of vehicles, that is, imported vehicles must be "more than 3 years old and less than 5 years old." Local media Mehr News, Khabaronline, etc. quoted relevant information as saying that in 1405, this regulation corresponded to model years 2021, 2022 and 2023.

It is worth noting that this is not a permanently fixed "white list for 2021-2023." Since the policy is dynamically calculated based on the age of the vehicle, after entering the 1406 Iranian calendar year, the window for imported model year will also move backward accordingly. For China exporters who need to go through long cycles such as procurement, preparation, shipping, and customs clearance, this is a factor that must be considered when formulating an inventory plan.

Iran's free market dollar rose 21.6% after 30 days of liberalizing imports

Changes in the exchange rate after policy liberalization are more worthy of attention than the access itself.

According to Sahmino's records, the Iranian free market U.S. dollar exchange rate was 189,400 Tumans to the U.S. dollar on August 20; as of 19:59 on September 19, it had reached 230,260 Tumans.

In just 30 days, the increase was 40,860 Tumans, or about 21.6%.

Other Iranian market data also basically confirms this change. On September 19, Alanchand quoted it in US dollars as 231,000 Tumans;TGJU quoted it as 2,301,000 rials, equivalent to 230,100 Tumans-in Iranian currency, 1 Tuman equals 10 rials; and Mehr News quoted it at noon that day as 228,270 Tumans.

In other words, no matter which market data source is used, the current Iranian free market dollar price is already at a high level of around 230,000 Tumans.

It should be noted that this does not mean that "liberalizing the import of used cars will lead to the devaluation of the Iranian currency." The original report clearly pointed out that the two only overlap in time and there is no sufficient basis to prove the causal relationship.

Since September, the rapid fluctuations in Iran's free market exchange rate are mainly related to macro factors such as the regional situation, Iran-US relations, and expectations of financial sanctions. On September 1, the US dollar once rose to 209,300 Tumans. Since then, as the Strait of Hormuz security incident and expectations of a new round of bank sanctions heat up, the exchange rate has continued to be under pressure.

But for car importers, the reason is not the most critical issue. What is important is that vehicles must be purchased in foreign exchange. Every one-percentage point increase in the US dollar may be directly transmitted to the landed cost of imported vehicles.

Whether the "20,000 imported vehicles" can drive down the price of Iranian cars remains doubtful

An important purpose of the Iranian government's reopening of used car imports is to balance domestic car prices, but the rising exchange rate is weakening the possible effect of this policy.

An obvious feature has recently emerged in the local automobile market: the price of imported cars responds significantly faster to the exchange rate than domestic cars.

According to EcoIran reported on September 12, in the previous three trading days, the free market exchange rate of the US dollar rose by about 1.3%, while the prices of some imported cars rose by 8%-9.5% during the same period. Due to weak market demand, the price response of Iranian domestic vehicles has been relatively slow.

On September 5, EcoIran further described the local auto market as clearly "polarized": some domestic models entered the price adjustment stage, while imported models continued to rise.

Domestic cars are not completely unaffected by cost. Iran Khodro (IKCO), one of Iran's largest automakers, announced on September 3 that its terminal selling price will also be increased due to increased fees such as scrapping certificates and vehicle registration.

This means that after second-hand imported cars enter Iran, they not only have to face competition from local domestically produced cars, but also enter a price system in which exchange rates, official guidance prices, market prices and import costs are intertwined.

What does it mean for China's used car exporters?

From the perspective of China's used car export business, the reopening of the Iranian market has undoubtedly increased new export opportunities, but at this stage it is more appropriate to regard it as a "policy window market" rather than an incremental market that can be immediately distributed on a large scale.

The first is the model year. Currently, the core access scope is locked in the 2021-2023 model year. Therefore, when selecting vehicle sources, companies cannot only look at the first registration date, but also need to verify vehicle qualifications according to the Iranian importer's identification method of "model year". In particular, it is necessary to pay attention to the inventory risks brought by the rolling of the access window after the policy crosses the year.

Second is scale. The annual import cap of 20,000 vehicles is not large in Iran's entire automobile market. It is difficult for the import license itself to completely change the local supply and demand relationship with this scale. It also means that the market capacity cannot be overestimated because of "reopening imports."

The third and most critical point is foreign exchange.

From August 20 to September 19, the Iranian free market dollar has risen from 189,400 to 230,260. Assuming that the purchase price of vehicles in US dollars remains unchanged, exchange rate factors alone are enough to significantly increase import costs in Turkish terms.

Therefore, in the current used car business in Iran, the importance of quotation validity period, payment currency and exchange rate risk control may not be less than the purchase cost of the vehicle itself. If China exporters first purchase locked cars in RMB and then wait for Iranian buyers to raise US dollars or other settlement currencies, once the cycle is lengthened, it is easy to happen that "the car price has not changed, but the buyer's local currency costs have become completely different."

In addition, Iran has long faced international financial sanctions, and actual transactions also involve banking channels, financial compliance and sanctions risks. Before conducting business, China companies should check relevant information such as transaction entities, banks, shipping insurance and end users, and ensure that settlement and trade processes comply with China laws and applicable international sanctions and compliance requirements.

Source: Guangdong Good Car

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