19 Mar 2024
Sunday 19 March 2017 - 12:38
Story Code : 255157

Why French carmakers are real winners of Iranian protectionism

Al Monitor |Ali Dadpay: Irans auto industry is only second to its energy sector, accounting for some 10% of the gross domestic productand 4% of employment. Showcasing the Islamic Republics 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 carmakerswho have clearly found their niche in the largest auto market in the Middle East.In this equation, Iranian consumers are ultimately paying for the governments 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 Irans hazardous roads and Tehrans traffic-jammed streets.

The governments rationale supported by domestic automakers is simple: Irans car industry is still in its infancy and must be protected from technologically superior foreign competition. Irans car manufacturing industry is the largest in the Middle East and North Africa and the 13th largest in the world, and the country counts 13 active automakers. Yet, the relatively large number of automakers does not mean that the market is competitive.

Indeed, only two firms account for 94% of total output: Iran Khodro Corporation (IKCO) and SAIPA. IKCO has joint venture and license production agreements with French automakers Groupe PSA and Renault. The deals involve local production and assembly of Peugeot and Renault cars, which are exemptfrom import tariffs. As such, through its agreements with local automakers, PSA and Renault are in effect bypassing Irans stringent trade barriers.

IKCOs production and sales of French vehicles is significant and growing. Figures show that IKCO output increased by 30.8% in 2016. Of the close to 400,000 cars it produced last year, 94,474 were a version of the Peugeot 206; 97,959 units were different types of the Peugeot 405; and78,703 were a version of the 405, known as Peugeot Pars. In total, cars produced in partnership with PSA constitute a whopping 70% of IKCOs production.
Read More Here
https://theiranproject.com/vdcenn8wfjh8nzi.1kbj.html
Your Name
Your Email Address