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BMWs Languishing at Iran Dealers as Sanctions Boost Costs

28 March 2012 11:12 (UTC +04:00)

Baku - APA-Economics. Mostafa Farahmand, who oversees sales at a car dealer in Tehran, hasn’t replenished his stock of Porsche, BMW and Mercedes-Benz models for months because neither he nor his customers can pay for them, APA reports citing Bloomberg.

Demand for European and Asian cars has plunged as sanctions imposed by the U.S. and the European Union on Iran restrict access to foreign currency, making the vehicles hard to come by and raising prices beyond the means of most Iranians.

"We haven’t imported for about four months," said Farahmand, the sales chief at Negaheshahin Co. in the Iranian capital, which has 35 cars on display, including Korean and Japanese models. "With the current status of foreign currency, it ends up being too expensive."

Mahmoud Ahmadinejad’s government has restricted currency exchanges to prevent a flight of capital after sanctions were imposed in an effort to curb the Islamic republic’s nuclear program. This forces dealers to buy a dollar for 18,900 rials on the open market, a 65 percent premium over the official rate, Farahmand said. Inflation and waits of as much as three months to clear customs heighten the risk of importing autos, he said.

Iran has long had a culture featuring modern conveniences, including cars. Fueled by oil revenues, the streets in Iran’s major cities are filled with vehicles and, in Tehran, it’s not unusual to see cars from Europe and Asia. One way to judge the impact of current sanctions is to look at the state of the car industry in Iran -- and it’s suffering.

Car sales in Iran are expected to fall 10 percent this year, after a flat 2011, as the economy slows, said Pierluigi Bellini, an analyst with IHS Automotive in Milan, Italy, who covers the Middle East. About 1.46 million cars were sold in Iran last year, with about 200,000 imported, according to IHS.