Lacking Competition, Israel Car Importers Have Doubled Their Profits

Treasury report says sector doesn’t pass along savings from the strong shekel.

A parking lot with cars at the Kfar Sava train station.
A parking lot with cars at the Kfar Sava train station. Ezra Levy

Israel’s car importers doubled their profit between 2006 and 2014 to between 1.9 billion and 2 billion shekels ($520 million-$550 million) while the rate of profitability grew to 9.3%, much higher than other companies in the trade sector, the Finance Ministry said Sunday.

The study, which was prepared by the treasury's chief economist, said auto importers have enjoyed a bonanza thanks to a surge in car imports over the last decade. Average annual profits for the sector were 1.6 billion shekels a year during 2007-2014 (in 2014 prices), a 72% increase from the average for 2003-2006.

Meanwhile, the government’s tax from customs and purchases taxes on imported cars rose just 16%, the treasury said.

The study ascribed the soaring prices to the absence of competition in the sector. While the sector was became somewhat less concentrated in the years 2006 through 2012, the trend has reversed itself since then, the report said.

Most of the profits are earned by the top four importers, which averaged about 1 billion shekels for each over the years 2013-2015. Israel's 12 car importers, mostly family-owned companies, employ 6,000 people who earn a relatively high gross salary, averaging 14,000 shekels a month.

Concentration has enabled car importers not to pass on the full value of the shekel’s appreciation to buyers, a phenomenon documented with food imports in a similar study the treasury conducted on that industry.