In its 2025 grand economic plan, Iran envisions to become the Middle East’s number one automotive industry of the region, aiming to rank fifth in Asia and eleventh globally.

With this target in mind, the country plans to produce three million units. To reach this goal, the Iranian Industry Ministry has outlined some key strategies – increasing manufacturing power, developing investment, increasing technology transfer and boosting research, expanding international cooperation to help improve domestic production, and plans to diversify financing methods.

As it pursues this strategy, the proclivities of Iran’s automotive sector must be fully understood, especially by investors primed to play a part in its future.

A Penetrated Market At All Levels
In 2014, the International Automotive Association reported that there were around 13.5 million commercial vehicles in Iran. A large number of these are foreign brands that, for many years, have had joint ventures with Iranian partners. For example, non-luxury models are commonly Peugeot and Renault, with South Korean Kia and Huyndai also common.

As regards luxury models, the main brands found in Iran are BMW, Audi, Mercedes-Benz and Porsche. While Iran’s car market is affordable for locally built vehicles, it is incredibly overpriced for imported cars, for which tariffs can reach 100% (Financial Tribune, 06.06.2017). Such high tariffs are meant to protect Iran’s own automotive sector, thereby affording a heavy level of protectionism for domestic manufacturers and dealers.