BUENOS AIRES – A new tax in Argentina is wreaking havoc on dealerships and consumers, and adding to the woes of manufacturers already grappling with onerous trade restrictions, including a new proposal to limit auto-parts imports.

After Argentines bought nearly 1 million new cars in 2013 – a record – sales have plummeted since the 2-tier tax was levied Jan. 1. With the government hemorrhaging hard-currency reserves, the protectionist move largely was designed to cull demand at the top end of the market and discourage imports.

Consumers now face a 50% duty on cars whose dealer-invoice price is more than 210,000 pesos ($26,500), and 30% on models invoiced at more than AP170,000 ($21,500). The rate previously was 10%.

In another move to shore up dwindling reserves, the government devalued the peso 19% in late January. That forced prices of imported products to soar (imports comprise 70% of Argentina’s auto market, according to industry experts) and effectively stymied the sales of top-end cars, prices of which have doubled.

“The tax has (almost) completely stopped sales,” says Rolando Domizi, one of two salesmen at a Hyundai dealership in Buenos Aires. “There’s nobody coming into the showroom.”

Domizi says he and his colleague had sold six cars from December through February. Last year, they made about 60 sales in the month of January alone.

That plummet in demand is reflected across the board. The number of new vehicles registered in February was nearly 58,000, a year-on-year drop of 8.5%, according to ACARA, Argentina’s dealers association. Sales in January and February slipped 3.9% to 166,000, compared with 173,000 compared with year-ago.

The government is refusing, at least for now, to lift the tax floor from AP170,000 to ARS212,000 despite the pleas of ACARA, importers and ADEFA, the local automakers group.

 “In the (preliminary) figures for March, we’re already seeing a fall,” ACARA Secretary-General Ruben Beato tells WardsAuto, adding the association expects new-car sales to plunge 30%, to about 600,000 units, in 2014. “I totally criticize the measure; it thoughtlessly distorts the market.”