Can Iran shield its embattled auto sector?

TEHRAN, Iran — Last week, a group of lawmakers from the Iranian parliament’s Industries and Mines Commission introduced a motion to further raise import duties on passenger cars. The underlying assumption is that Iran’s 48-year-old auto industry is at risk amid the grassroots campaign on social media to discourage purchases of domestically made “low-quality” cars.

Among other efforts to shore up the troubled Iranian auto industry is a recent letter by the head of Iran’s Customs Administration that has been widely circulated in local media. In his letter to the Ministry of Industry, Mines and Trade, Masoud Karbasian calls for an increase of up to 150% in car import duties “to prevent imports of luxury vehicles and achieve the revenue target from car imports for this fiscal year.”

Iran currently applies duties at rates from 4% to 100%, with a vast number of products subject to the highest rate. Iran is among less than two dozen nations that have yet to join the World Trade Organization (WTO), an international body that prohibits levying high tariffs. Minister of Industry Mohammad Reza Nematzadeh said in a May speech that Iran would soon apply for WTO membership. Of note, Iran’s bid for accession into the 161-member trade body has long faced a US veto. However, Washington agreed to drop its opposition as part of the interim Joint Comprehensive Plan of Action reached between Iran and six world powers in November 2013.

High import duties are obviously aimed at supporting Iran’s financially and technically weak manufacturing sector. However, Iranian citizens increasingly complain that state support for domestic industry has put intolerable financial pressure on their shoulders, as they waste their money on low-quality products. The only remaining option for consumers is to buy smuggled goods, which are of relatively better quality, but offered at higher prices unaffordable to millions of Iranians.