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Import Tariffs: Why Are Cars So Expensive In Tunisia?

Geoff Riley

16th April 2021

Only one in eight cars imported into Tunisia is a new car. The vast majority are used vehicles yet they still sell at vastly inflated prices.

This Business Insider video is excellent for understanding how a raft of indirect taxes - including very high import tariffs and 19% VAT - drives up the retail price of used cars in a country where per capita incomes are less than $500 a month.

Add to that an unstable exchange rate whose value has dropped heavily over recent years and it is clear to see why the effective demand for used and new cars in Tunisia is so constrained.

Wally's Cars - a small-scale producer importing engines from France and assembling & manufacturing new vehicles using cheaper materials is hoping to change the dynamic in the Tunisian car industry but they have not achieved the economies of scale and sufficiently large capacity to be able to do it.

The video also provides a window into the used car market in Tunisia - a classic example of asymmetric information as we watch customers searching for a decent car that they can afford.

Import Tariffs: Why Are Cars So Expensive In Tunisia?
Import Tariffs – Analysis Summary

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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