Iran’s automotive industry is the third most active industry of the country, after its oil and gas industry, accounting for 10% of Iran's GDP and 4% of the workforce (700,000 people).Iran’s automakers stalled by sanctions . Washington Post, October 14, 2013.
Iran developed a significant automotive industry with annual production of up to 200,000 units under the Mohammad Reza Shah Pahlavi's regime. But after the Iranian Revolution of 1979 production drastically decreased due to Iran–Iraq War and international sanctions. Since the early 2000s, automobile production in Iran has grown exponentially. Iran's automobile production crossed the 1 million mark in 2007/2008. As of 2024, Iran is the 13th largest automaker in the world and one of the largest in Asia, with annual production of more than 1.3 million. In 2009, Iran ranked fifth in car production growth standing next to China, Taiwan, Romania and India. According to OICA statistics, production dropped dramatically to under 750,000 automobiles and commercial vehicles in 2013.
As of 2001, there were 13 public and privately owned automakers in Iran, of which two—Iran Khodro and Saipa—accounted for 94% of the total domestic production. Iran Khodro, which produced the most prevalent car brand in the country—the Paykan, which has been replaced in 2005 by the Samand—was still the larger with 61% of the market in 2001, while Saipa contributed 33% of Iran's total production in the same year.. Retrieved November 14, 2008. Iran Khodro is one of the largest car manufacturers in Asia. It has established joint-ventures with foreign partners on 4 continents.
The Iranian manufacturers currently produces several types of vehicles, including cars, 4WD, trucks, buses, minibuses, and pickup trucks. The sector directly employs about 500,000 people (roughly 2.3% of the workforce), and many more in related industries. About 75% of local output is passenger cars, with pick-ups the next largest category, accounting for around 15%.
In July of 2024, Iran began allowing the import of second-hand Japanese, Korean and European cars, with a limit of one vehicle purchase per citizen national ID card number.
Historical development
In the 1960s, lacking the technical know-how and unable to produce its own automobiles, Iran invited Western firms in order to start a domestic automobile industry. Since then, Iran has developed its domestic industry where it can design and assemble cars on its own, including a new car factory in Kashan. The average operating margin of the five major Iranian automakers dropped by 1% from 13% to 12% in 2011. The seven development phases of Iran's automotive industry have been:
1. Assembly (with Western assistance) 1969–1989 2. Spare Parts Industry Development 1990–present 3. Auto Design 1975–present 4. Mass Production 1975–present 5. Establishing Export Bases 2006 – Present 6. Mass Auto Export 2008–present 7. Development and Use of Domestic Platforms 2012–2016, onward
Historical production by year YearData0—0.5 million0.5—1 million1—1.5 million1.5—2 million197035,000 1980161,000 199044,665 2000277,985 2005817,200 2006904,500 2007997,240 20081,051,430 20091,395,421 20101,599,454 20111,648,505 20121,000,890 2013743,647 20141,090,846 2015982,337 20161,164,710 20171,515,396 20181,342,000
Market and domestic production
In 2008, IDRO reported that SAIPA accounts for 54%, and Iran Khodro for 46% of the output. Although carmakers are listed on the stock exchange, the government still owns about 40% of both companies. In July 2010, the government sold a further 18% stake in both Iran Khodro and SAIPA for about $2 billion in total, bringing down its participation in both companies to about 20%. In August, both deals were cancelled by the Iranian Privatization Organization. No clear reason was given for the cancellation of the deals, but analysts believe that discontent over the prices at which the blocks were traded is most likely to be the reason. Unofficial estimates put the sector’s debt to Iranian banks as high as 100 trillion rials ($4 billion).
The other car manufacturers, such as Azhitechs, Bahman Group, Rakhsh Khodro, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%. These automakers produce a wide range of automobiles including motorbikes, passenger cars, vans, mini trucks, medium-sized trucks, heavy duty trucks, minibuses, large size buses and other heavy automobiles used in commercial and private activities in the country. Iran Khodro Diesel has a dominant market share (+70%) in bus, truck and van production.
Having a fleet of 7 million passenger cars, buses and trucks, Iran ranked the world’s 16th biggest automaker and one of the largest in Asia in 2006, with annual production above 1 million units and 1.3 million in 2009,Iran Daily - Domestic Economy - 06/12/07 resulting in almost 1.5 percent of total world production of vehicles and 1 car per 10 people. Iran's fleet reached 11.5 million cars by 2020 and 14 million by 2014 (half of which are dilapidated).
60% of passenger cars produced in 2008 use natural gas as fuel or are dual-fuel, and the remaining 40% will run on regular gasoline (2008). Some problems faced by the industry are slow deliveries of cars, lack of after sales services and low quality in the production of some cars.Iran Daily - Domestic Economy - 06/15/08 Car production in Iran has increased 445% between 1998 and 2008. In July 2013, sanctions imposed by the USA prevented Iranian companies from importing the vehicle parts upon which domestic cars rely; this caused Iran to cede its place to Turkey as the region’s top vehicle manufacturer. Because of sanctions on spare parts by France's Peugeot and Renault, car production in Iran dropped by as much as 40% in 2012 before recovering somewhat in 2014 following the Geneva interim agreement.
More than half of the vehicles in Iran are over 10 years old (2009). The government has sought to upgrade the local fleet and the authorities aim to pull some 200,000 outmoded vehicles off the road each year, underpinning demand. According to estimates the demand stood at 1.5 million vehicles in 2007, which could not be met by the local producers. Auto manufacturing industry's share in gross national product is two percent and Iran's auto production rate in the global markets is 1.7 percent (2008). Previously buyers had been purchasing vehicles outright in cash, but now over half of all new car sales are through finance companies or on lease purchase schemes.
Motorcycles There were more than 8 million motorcycles in Iran by 2010, with 1,500 motorcycles getting registered each day. Motorcycles account for 30% of air pollution in Tehran. Domestically manufactured motorcycles conform to Euro 2 emission standards, yet catalyst transducers are not being used. On the other hand, the rest of the world has considered the Euro 5 emission standards for motorcycles.
Exports In 2007, Iran car exports stood at around $500 million. Iran car exports reached $1 billion by March 2009.Payvand:Iran car exports projected to reach $1b by March . Retrieved October 24, 2008. Overall production is expected to rise to 1.13 million units by 2012 ($200 million in exports expected by 2010) and 60,000 units exported by 2013.
Auto parts
Sapco and Sazeh Gostar are the respective purchasing arms of Iran Khodro and Saipa (the two largest Iranian auto manufacturers). The Iranian automotive parts industry consists of approximately 1200 companies (15,000 factories), which include those affiliated to vehicle manufacturers as well as independent firms. The industry consists of two primary sectors: Original Equipment Manufacturing (OEM) suppliers, which produce parts for auto makers, and After-Market Parts Manufacturers (AMPM), which produce replacement parts for vehicles. Over 39 countries purchase Iranian auto parts (2008). As of 2014, 10 tire manufacturing units are operating across the country with a production capacity of 240,000 tons per annum. They meet 70 percent of the domestic tire demand (11 million tires per year). As of 2015, 60% of auto spare parts in the Iranian market are imported from foreign countries. Most cars are produced in Iran under licence from foreign manufacturers and it depends on them for critical imports, ranging from pistons, cylinder heads, valves, starters, alternators, airbags to computer chips (incl. engine control units and sensors). The media has reported that the IRGC is cooperating with the auto industry ( including 32 domestic part makers) to remedy these deficiencies.
Since 2020, Iranian manufacturers are also producing parts such as automotive immobilizers, electronic control units, oxygen sensors, electric seats, electric steering, six-speed automatic transmission, polymeric materials, modulators, injectors, airbags, multimedia, direct current (DC) motors, all types of electrical sensors and digital front amplifier.
Research and development
There are different ongoing R&D projects both at the governmental and private sectors. These projects research are mostly aimed at local market of Iran and its particular problems. New lines of locally designed and manufactured diesel, gasoline and dedicated CNG engines are being developed. There are also some research being done on hybrid and electric vehicles for the future Iranian market. In addition to this nanotechnology is being researched for introduction into production lines in order to improve the quality standards and customer satisfaction by offering anti-bacterial seats, anti-scratch paint, hydrophobic glass panes, maintenance-free air filters, anti-stain dashboards, nano-catalytic converters and nano-diamond containing lubricating oils.
In 2011, the Nanotechnology Initiative Council announced plans to export to Lebanon a series of ‘home-made’ nano-based engine oils manufactured by the Pishgaman–Nano-Aria Company (PNACO); these nano-based oils reduce engine erosion, fuel consumption and engine temperature. In 2009, researchers at Isfahan University of Technology developed a strong but light nanosteel as resistant to corrosion as stainless steel for use in road vehicles but also potentially in aircraft, solar panels and other products.
As of 2016, Iran had no known R&D project in the important field of autonomous cars.
Foreign direct investment and imports
There are over 25 automakers in Iran, actively producing both light and heavy vehicles. They are in joint venture with companies such as Dongfeng (China), Peugeot, Citroen (France), Volkswagen (Germany), Nissan (Japan), Toyota (Japan), Kia Motors (South Korea), Proton (Malaysia), and Chery (China). Many other established producers of light and heavy vehicles such as Renault (France), BMW, Mercedes Benz (Germany), Daewoo, and Hyundai (South Korea) have emerged since 1991. Italian carmaker Fiat has also announced plans to begin production of its Siena sedan in Iran in 2008.
Chery Automobile (China) in August 2007 entered into a US$370m joint venture with Iran Khodro, Iran to produce cars for West and South Asian markets. Chery Automobile is to hold 30% of the venture, and Khodro will hold 49%. Solitac, a Canadian front company, is to hold the remaining 21% of the venture. The factory will be in the Iranian city of Babol. Anhui Ankai Automobile (also of China) signed a deal in January 2008 with ARG-Diesel Iran to supply it with 600 buses, valued at €51.35m. The deal is to be complete by October 2008.