Auto industry faces rising prices, supply issues — sector representative

AMMAN — Car prices are witnessing a notable rise accompanied by a shortage in supply, according to Jihad Abu Nasser, representative of the automobile sector at the Jordan Free Zone Investor Commission.

“The prices of hybrid cars have witnessed a 20 per cent increase of roughly JD2,000 to 3,000. Part of this is due to the 10 per cent increase on hybrid car customs, which raised their prices JD1000 to 1500,” he told The Jordan Times.

The repercussions of the COVID-19 pandemic, increasing production costs and the closure of ports, as well as the disruption of supply chains, have doubled freight rates, thereby increasing hybrid car prices an additional JD1000 to 1500, he added.

Abu Nasser also noted that car prices, overall, have been undergoing a yearly increase caused by the pandemic.

“Traditionally, car prices drop because newer models are introduced to the market. Nowadays, the opposite of that is happening, due to the slowed production and inventory shortage,” he said. 

The issue of silicon chips shortage, which has taken a “hard-hit” on the auto manufacturing industry during the COVID-19 pandemic, is a main factor disrupting production, according to Abu Nasser.

He noted that these chips are essential in manufacturing all types of electronic devices, including cars.

In the first half of 2020, when the overall consumer demand for cars declined during lockdowns, the focus shifted to producing other items, such as laptops and smartphones, as the demand for these items increased with most people working and studying remotely, said Abu Nasser.

“Many automakers cut orders for these chips when the pandemic hit, because their production was on pause, but when auto demand rebounded after the lockdowns were lifted, they were faced by a shortage in silicon chips,” he added.

Abu Nasser also noted that over the past year the prices of all cars have increased no less than 10 per cent. He added that the prices of American cars in particular have witnessed a 50 per cent increase and European cars a 20 per cent increase. 

Jordan imports cars from the US, Europe, Gulf countries, including Kuwait, the UAE, Saudi Arabia, and Qatar, and from the East Asian market, mainly South Korea and China, according to Abu Nasser, who noted that most of these auto markets are currently “near a standstill”.

However, he said that imports from China to Jordan have increased notably in the past two years, “as 25 per cent of cars imported in 2022 were mainly electric cars from China, while in 2020, only 1 per cent of cars were imported from China”.

In previous years, the demand for electric cars was low due to “the scarcity of charging stations in the Kingdom, however the batteries of the latest electric cars counter this issue, as they can last up to 300 to 500 kilometres,” said Abu Nasser. 

He added that their customs are stable at 10 per cent, whereas the customs duty for hybrid cars now stands at 55 per cent, reaching its cap.

“The clearance of cars, in general, dropped by 30 per cent compared to 2021,” added Abu Nasser, pointing out that during the first three months of 2022, roughly 3,000 cars were cleared a month, whereas at the same time last year, around 5,000 cars were cleared each month.

Currently, the stock of hybrid cars in the Zarqa Free Zone is only 10,000, while it usually reaches around 30,000 to 40,000 cars, according to Abu Nasser. 

However, stagnation during winter is somewhat normal, he said, predicting a gradual increase in cars’ imports and clearance numbers in the upcoming months during summer “when demand is usually at its best”.