The sudden rise in car prices in Iran has created an unusual dilemma for the country’s economy. Unable to solve these kinds of issues, President Hassan Rouhani’s administration usually either blames these problems on systemic issues or as part of a psychological war waged by hostile powers. But neither of these explanations has any social acceptance in Iran.

During the past few weeks, a radical increase in the price of cars has resulted in domestic manufacturers announcing various plans to release more vehicles into the market. But what is the real reason for the price surge? The root of the problem might be found in a decision by the Ministry of Industry, Mine and Trade back in July 2017 to close down the car registration system. The reason for this move was to update the rules and regulations related to imports and related tariffs. The system stayed closed for six months before being reopened on Jan. 1. But what were the effects of this on the car market?

Asal Dadashloo is a car marketing expert who has a popular online program in which she discusses the technical differences between various domestically manufactured cars. She told Al-Monitor, “The sudden rise in the price of imported cars goes back to the administration’s problematic decision of July 2017 to close the registration website. While the market had reached a plateau due to imports, the six-month-long halt resulted in a rise in prices for the existing cars. Some import companies were able to find loopholes and continue to import cars, but then they started hoarding the cars and selling them for a much higher price after the new tariffs were announced.”

In reality, Rouhani’s administration had decided to introduce the new tariff in order to conserve hard currency, and it no doubt knew that this would result in a radical rise in the price of imported cars. However, this decision not only impacted the price of imported cars, but it also resulted in domestic car manufacturers increasing their prices. The latter’s main reasoning is rooted in the rial devaluation and also the yet to be confirmed reports of the presence of foreign auto companies in Iran. Meanwhile, the administration recently also announced an outright ban on the import of cars in a move geared to conserve foreign exchange.