Cars in Israel to Get Cheaper After Gov't Smiles on Reform

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Cars in Israel may yet get cheaper for consumers after the Israeli government on Sunday approved draft legislation to reform the country's car industry.

Initiated by Transportation Minister Yisrael Katz, the bill would boost competition by requiring auto services, like garages, maintenance and repair, to be licensed.

The Transportation Ministry will step up supervision of garages and impose sanctions on consumers who repair their cars in illegal garages. It will also strengthen the position of general garages, as opposed to licensed manufacturer garages, by requiring automobile importers to supply them with technical information and training and to publicize clearly defined criteria for garages to join their chains.

In addition, the Transportation Ministry will begin authorizing "expert garages" that service vehicles of various makes.

In the spare parts market, procedures and standards that are peculiar to Israel will be eliminated and supplies will be boosted. Spare parts importers will be obligated to create a database to allow consumers to compare prices. An additional data base will be established to provide users with information on the history of used cars.

Introducing the mini-importers

The draft legislation will also change up the new car market in a way that it says will chiefly benefit "consumers of luxury cars." The new-car measures focus on encouraging personal car imports by introducing new procedures and authorizing a new category of "small-scale importers," which will be able to import only up to 20 cars a year. Significantly, leasing companies and used car dealers also be able to sell new cars without having to register as their former owners, allowing them to directly compete with car importers.

As for supervision. the draft legislation suggests the transportation minister review competition in the automobile industry "from time to time" and authorizes him to dismantle automobile importing firms and limit the discounts awarded to leasing companies. More drastic measures proposed by the Zelekha Committee, headed by former Finance Ministry accountant general Yaron Zelekha, do not appear in the text.

At Sunday's cabinet meeting, Katz presented the draft legislation as a continuation of his ministry's previous reforms of Israel Railways and the airline industry via the Open Skies agreement with the European Union, which the government ratified last week.

“I am confident that the implementation of the reforms, which are aimed at removing hurdles in the market and eliminating obstacles to competition in the automobile industry, will reduce the prices of new cars for consumers by at least 20 percent and the prices of spare parts by dozens of percentage points,” he said.

Prime Minister Benjamin Netanyahu said at the meeting that by reducing costs associated with passenger vehicles, the draft legislation will save Israelis thousands of shekels per year.

According to figures released Sunday morning by the Transportation Ministry, the average monthly expenditure on a new private vehicle in Israel is NIS 1,500, and the annual total turnover in Israel’s automobile import industry is NIS 30 billion. The figures also show there are three million cars in Israel, of which 80 percent are private vehicles; there are 333 cars per 1,000 residents, compared to 500 in Europe and 870 in the United States, and the average vehicle on the road is 7 years old, compared to ten in Europe and the U.S.

The first car imports from China reaching Eilat Port (2007).Credit: Mori Chen
Transportation Minister Yisrael Katz.Credit: Daniel Bar-On

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