Government's Decision Threatens Iraqi Automotive Industry
Author: Omar al-Shaher Posted February 24, 2013
A sudden government decision has caused confusion among the car market in Iraq and resulted in a significant rise in prices.
Earlier this year, the Iraqi government decided to repeal an exception granted to the state-owned General Automotive Co. that exempted the company from having to cancel the license plate for an old car each time they sold a new car.
Since 2006, Iraq has employed a system of phasing out old cars in exchange for new ones, creating a black market for license plates. A Baghdad license plate costs nearly $5,000, while prices for plates from other provinces range between $3,000 to $4,000. The only exception are plates from the three provinces of Iraqi Kurdistan, in which plates are sold directly to the buyer without the condition of phasing out an old registration. In these provinces, license plates do not exceed $1,000.
Because of this, thousands of private cars in Baghdad have license plates registered in Kurdistan.
While Iraqi media outlets were awaiting the decisions of a special government meeting — which was held to face the repercussions of the heavy rains and floods that hit different parts of Iraq in January — the meeting issued a decision to repeal an exception granted to the state-owned General Automotive Company that exempted it from the phasing out system. This move shocked car companies and automotive dealers.
The General Automotive Co. said that the decision to repeal the exception would be applied retroactively to all sales made by the state-owned company since January of this year. During this period, the company sold about 6,000 cars to Iraqis, promising buyers free registration plates. The government's decision, however, means that those who purchased cars will now have to bear the cost of registering a license plate.
Under the previous system, when General Automotive was exempt from this requirement, the company sold Iranian-made Saipa cars for about $6,500, including plate registration fees. However, with this recent decision their price in the local market will increase by about $800. Given the recent decision, car owners now have two choices: they can either trade out the registration of an old car — and pay about $5,000 — or park their cars at home, since the traffic police will not allow them to drive without a license plate.
The decision to repeal the exemption has led to a rise in the prices of old cars, as well as increase in the price of new cars with original plates.
Car dealers in Baghdad said that the government's recent decision has led to an increase in the price of registering a plate from $5,000 to $6,000. They expect that this price will continue to increase unless the government reverses its decision.
The Iraqi government has refused to comment on the matter. The General Directorate of Traffic said that the requirements imposed by the recent government decision are related to reducing the flow of cars in Iraqi provinces, which are currently above capacity.
Yet the heads of local councils in the Babil and Wasit provinces — in the center of the country— as well as those from other provinces in the south, issued a letter to Iraqi Prime Minister Nouri al-Maliki in which they noted that the provinces are in need of more cars, based on the ratio of population to number of cars.
These local council heads said that the government had promised to study the matter, but has yet to take a position.
Car dealers in the capital said that the local market cannot tolerate a long wait, and that the government should clarify its position. They warn that the government's insistence on the decision to cancel the exemption would lead to the destruction of automotive trade in Iraq.
Omar al-Shaher is a contributor to Al-Monitor’s Iraq Pulse. His writing has appeared in a wide range of publications including France’s LeMonde, the Iraqi Alesbuyia magazine, Egypt’s Al-Ahaly and the Elaph website. He previously worked for Al-Mada covering political and security affairs and as a correspondent for the Kuwaiti Awan newspaper in Baghdad in 2008-10.
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