Cheap used cars put new, fuel-efficient cars at disadvantage in local market
by Omar Obeidat | Apr 29,2012 | 22:24

AMMAN — New and fuel-efficient cars can cut the Kingdom’s gasoline subsidies by 40-55 per cent, according to automobile exporters.

In separate interviews with The Jordan Times, auto sector stakeholders urged policy makers to consider reducing taxes on hybrid cars and placing a three-to-five year age limit on vehicles imported to the local market to cut down the country’s rising oil bill and fuel subsidies.

They said such moves can reduce the consumption of oil derivatives, which are subsidised by the government, between 40 per cent and 55 per cent.

According to Gas Stations Owners Association (GSOA) figures, Jordanian motorists consumed 1.416 billion litres of petrol in 2011, 100 million litres higher than the volume in 2010.

The consumption of 90-octane gas, which is currently sold at JD0.620 per litre, reached 1.177 billion litres last year, while the consumption of 95-octane, which is currently sold at JD0.795 per litre, was 239 million litres, according to the GSOA report.

Based on the figures, the value of both gasoline types was around JD920 million last year.

According to the stakeholders, if cars on the Kingdom’s streets were relatively new and fuel-efficient, the bill would have gone down by approximately JD370 million to JD500 million a year.

Nabil Rumman, president of the Jordan Free Zone Investors Association, indicated that since the government decision in March 2010 to impose a 55 per cent as a special tax on green cars, importers in the free zone have completely stopped bringing the vehicles that are powered by fuel-efficient gas engines combined with an electric motor.

“The government, which offers subsidy to fuel prices, should have instead encouraged importing such green motors, particularly small-engine ones,” he said.

According to Rumman, out of 14,000 hybrids that were imported to the local market over the past few years, over 8,000 cars were powered by large engines.

He urged authorities to reconsider the decision and encourage the import of hybrid cars that their engines size are 2,000 CC or less and that consume less fuel by 60 per cent than gasoline-powered vehicles, insisting that this will generate more revenues to the treasury and reduce the ballooning oil bill.

Rumman also called for imposing a three-year age limit on cars that enter the domestic market.

Nihad Zachria, general manager of KIA Motors-Jordan, agreed, indicating that the agency in Amman does not import hybrid cars anymore due high tax, which he said have made the prices unaffordable for majority of Jordanians.

Zachria explained that Hybrid cars made by KIA consume less fuel by 45 per cent to 55 per cent compared with the same models that run on gasoline.

He noted that new gasoline-powered cars also consume less fuel than old autos, as new ones are equipped with fuel management systems.

Indicating that only 20 per cent of cars in Jordan were manufactured less than a decade ago, Zachria said renewing the fleet of cars can help generate revenues, reduce pollution and save fuel.

“Jordan has become the junk yard of the world’s aging vehicles,” he said.

George Haddad, president of the Central Trade and Auto Company (CTA) which is the Toyota agent in Jordan, echoed the same remarks, saying that demand on hybrids have gone down sharply in the past two years.

There is an increasing demand for green cars in Europe and North America due to rising fuel prices and manufacturers are also boosting their production of such motors, he said, crticising government’s decision to slap high taxes on the environment-friendly vehicles.

The 55 per cent special tax, Haddad said, has made the vehicles “very expensive” in the domestic market, suggesting slashing the tax to 25 per cent in order to market them in the country.

He also called for not allowing cars older than three years from entering the market, saying fuel consumption of new cars and hybrids is less by 40-60 per cent than old used motors.

“Because used cars are relatively cheap, people opted for them instead of using public transportation and that caused irritating traffic jams in Amman,” Haddad said.

Fact Box

* The number of cars in Jordan registered by the end of 2010 was around 1.1 million
* 68 per cent of all vehicles on Kingdom’s roads were manufactured 12 years ago or before
* Number of licenced cars that were manufactured between May, 2005 and May 2011 is 193,955
* Sales of new cars dropped from 46 per cent to 20 per cent in eight years
* Jordan imports around 60,000 used cars per year

According to figures in a study prepared by Automobile and Spare Parts Agents Association