Israel's Vehicle Import Tax Hits Record High Amid Shifting Market
Translated & summarized from Maariv by baba
Despite a 25% drop in vehicle imports in 2025, Israel registered a record number of new cars due to pre-emptive importing to avoid tax hikes. The total value of imports fell, influenced by cheaper Chinese electric vehicles and reduced tax benefits. However, the average tax per car increased significantly, leading to a smaller decline in state revenue from vehicle taxes.
The story in 6 lines · by baba
- Israel registered a record 290,000 new passenger cars in 2025 despite a 25% drop in imports.
- Vehicle importers stockpiled cars in late 2024 to avoid new taxes implemented in January 2025.
- The total value of imported vehicles in 2025 fell by 20.9% to 23.6 billion shekels.
- China supplied 88% of electric and 96% of plug-in hybrid vehicles imported in 2025.
- The average purchase tax per vehicle rose 15.2% to 52,200 shekels in 2025.
- State revenue from vehicle taxes saw a smaller 13.9% real decrease despite lower import volumes.
Despite a 25% drop in the number of vehicles imported into Israel in 2025 compared to the previous year, approximately 290,000 new passenger cars were registered, a record high. This apparent contradiction is explained by importers stockpiling vehicles at the end of 2024 to preempt tax increases that took effect in January 2025. A third of the annual import for both 2024 and 2025 arrived in December 2024, allowing importers to start the year with low imports while registering a large number of vehicles, with over 50,000 passenger cars registered in January alone.
The total value of imported vehicles in 2025 decreased by 20.9% to 23.6 billion shekels. Tax authorities attribute this decline to fewer imported vehicles, lower import prices, and the influx of cheaper electric cars from China. China dominated the electric and plug-in hybrid market, supplying 88% of imported electric vehicles and 96% of plug-in hybrids in 2025.
Simultaneously, tax benefits for advanced powertrain vehicles were reduced. The tax exemption for non-plug-in hybrids was canceled in 2022, and for plug-in hybrids in 2024. By 2025, the purchase tax on electric cars reached 45%. Despite these reductions, hybrid and electric vehicles constituted about 60% of new passenger car registrations, with non-plug-in hybrids at 28.4%, electric cars at 20%, and plug-in hybrids at 11.9%.
The reduction in tax benefits significantly increased the average purchase tax per vehicle to approximately 52,200 shekels in 2025, a 15.2% rise from the previous year. The effective average purchase tax rate climbed from 59.3% to 70.7% of the import value, even as the average import value per car decreased.
These tax hikes helped mitigate the impact of reduced imports on state revenue. Revenue from purchase tax on passenger cars and light commercial vehicles totaled 13.3 billion shekels, a real decrease of 13.9%. Thus, while the number of imported cars fell by a quarter, state revenue from taxes declined less sharply due to the higher tax collected per vehicle.
