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Why French carmakers are real winners of Iranian protectionism

While Iran's steep import tariffs for vehicles are ostensibly designed to protect local industry, it appears that the primary benefactors are French carmakers.
An Iranian technician sits in a Peugeot 206 car on the final production line at the Iran Khodro auto plant, west of Tehran, on February 20, 2016. / AFP / BEHROUZ MEHRI        (Photo credit should read BEHROUZ MEHRI/AFP/Getty Images)
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Iran’s auto industry is only second to its energy sector, accounting for some 10% of the gross domestic product and 4% of employment. Showcasing the Islamic Republic’s efforts to become an industrial economy, it is protected by high tariffs on car imports. However, it is time to ask who benefits most from these tariffs. Indeed, while the trade barriers are ostensibly introduced to protect Iranian automakers, it appears that the primary benefactors are French carmakers who have clearly found their niche in the largest auto market in the Middle East. In this equation, Iranian consumers are ultimately paying for the government’s protectionist policies.

Iran imposes a complicated system of tariffs and taxes on car imports, varying from 40-55% depending on the vehicle type. The government adds a 9% value added tax (VAT) and levies an additional 4% overall sales tax. As such, an Iranian consumer may pay customs and taxes amounting to as much as 80% of the value of an imported vehicle to be able to drive it on Iran’s hazardous roads and Tehran’s traffic-jammed streets.

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