Israel plans to dump used cars on Jordan and Iraq

Transportation Min. Katz approves plan to export thousands of used cars to Jordan, Iraq; move aims to free up market, boost Israeli new car sales.

By ARIEH O’SULLIVAN / THE MEDIA LINE
September 13, 2010 18:44
4 minute read.
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mazda311. (photo credit: judu siegel)

Israel has found a unique way to retaliate against Iraq for firing Scud missiles on it nearly 20 years ago; it has decided to sell Iraq Israel’s used cars.

Transportation Minister Yisrael Katz said he has approved a new plan to export tens of thousands of used cars to Jordan and Iraq. The move aims to thin out the glut of second hand cars on the market and pave the way for boosting new car sales, which would put millions of shekels into the government’s pockets in taxes.

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According to a statement from the ministry, about 50,000 cars could be sold to Jordan and Iraq annually, which constitutes about 10 percent of the used car market.

The decision was made after a study that showed such a move would make the average age of cars newer, safer and pollute less. What it didn’t mention was that it would also likely increase the price of used cars, which are now already about double similar cars elsewhere in the world due to heavy taxation.

The new plan still must get final approval from the Ministry of Finance since it would require giving tax breaks for selling a used car.

“We welcome the decision,” said Uri Digmi, the chairman of the Israeli Used Car Dealers Association. “This would bring about a situation where the average car was newer, greener, safer and more efficient and also reduce the number of old cars on the road.”

Each year, Israelis buy about 200,000 new cars. About 600,000 used cars change hands annually. The first eight months of this year saw about 140,000 new cars sold, which is reportedly a 27 percent increase over last year.



Israel charges an exorbitant 113 percent new car tax, which more than doubles the price of cars. This is the main reason used cars cost twice as much in Israel compared to the rest of the world.

The deal would require the state to give the seller of a used car a tax break, or even a voucher toward a tax reduction for the purchase of a new car, in order to make it competitive for dealers to sell used cars abroad.

“Israel right now is like an island, an isolated land where the cars come in and never leave. It’s not like Germany or Switzerland where you can resell them to neighboring countries,” Digmi told The Media Line.

The Transportation Ministry issued a report that found that the move would lower the average age of cars and boost new car sales, which would have a beneficial impact on road safety and engine emissions.

Digmi said the average age of cars in Israel was about five years and in an average lifetime it would be sold half a dozen times until it is eventually crushed in a junkyard. They are never taxed again so the state doesn’t gain anything.

“The state has to encourage the export of used cars abroad in order to improve the local market,” said Digmi. “The moment it comes here it remains until it dies. We have to change that. There’s plenty of market opportunities in our neighboring countries.”

According to Digmi, shiploads of used cars dock in the port of Haifa where they are unloaded and transported by lorry to Jordan and resold in Iraq.

“There’s plenty of room for the Israeli cars to enter this niche,” he says.

In Amman, Jordan, used car dealer Amer Salman was looking to unload his fleet of used cars. While he had no reservations in principle with the idea of selling Israeli cars on his lot, he was skeptical it would work.

“We have no problem doing business with Israel, but to be honest, we don’t need any more used cars in Jordan,” Salman told The Media Line.

“We have a huge surplus here,” said Salman, a salesman from the Amman dealership of Marwan Eneibsy. 

One of the reasons for this was the kingdom’s decision to give huge incentives to Jordanians buying hybrid cars. Taxes were dropped from 80 percent to just 5 percent, which created a glut.

The main beneficiaries in Israel of this new plan would likely be the large car leasing companies in Israel who purchase about 60 to 80 percent of all new cars in Israel. They sell them after some three years into what is a limited market.

In 1991, Iraq’s Saddam Hussein fired 39 Scud surface-to-surface rockets at Israel in an attempt to draw the Jewish state into the war against Iraq by a coalition of Arab countries and their Western allies. Under enormous diplomatic pressure from the United States, Israel did not retaliate, thus preserving the allied coalition. 


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