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Analysis of the Automobile Industry in Iran - Growth, Trends, COVID-19 Impact, and Forecast (2021 - 2026)

Analysis of the Automobile Industry in Iran - Growth, Trends, COVID-19 Impact, and Forecast (2021 - 2026)

  • October 2021
  • 76 pages
  • ID: 6177334
  • Format: PDF
  • Mordor Intelligence LLP


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The Iranian automobile market was valued at USD 26.43 billion in 2020, and it is expected to reach USD 45.56 billion by 2026 by registering a CAGR of about 9.57% during the forecast period (2021 - 2026).

The automobile industry in Iran witnessed a decline in growth due to the covid-19 pandemic and Sanctions imposed by countries like United States on Iran. However, as government in the country is taking the necessary actions to boost the productions of vehicles and parts locally to meet the demand for vehicles and reduce its import cost at the same time, market to witness steady and consistent growth during the forecast period.

Moreover, major car manufacturers in the country are also increasing their production with locally manufactured parts and components. Apart from these factors, ongoing projects, and rising e-commerce activities to further propel demand in the market. In addition, Iran’s auto sector has also become self-sufficient in the production of some parts to some extent after which foreign companies stopped supplying car kits to Iran when the United States reimposedsanctions on the Islamic Republic in 2018.

Apart from government, local OEMs are also entering into agreements and associations with the university, research institutes to upgrade the manufacturing technology related to auto parts and components which further expected to boost demand in the market during the forecast period.

Key Market Trends

Passenger Car Sales Expected to Dominate the Iranian Automobile Industry

Iran is one of the largest automotive markets in the Middle East owing to growing domestic production of auto components and rising consumer demand. However, the impact of sanctions and geopolitical turbulence is inevitable on the market. The international sanctions have had a tremendous impact on the industrial development of many industries in the country. Iran, which is the largest automotive market in the Middle East with a market of nearly one-third of the German automotive market, has seen a drop in the automotive industry with the implementation of the sanctions.

Despite the stringent lockdown and social distancing norms in the global scenario and the disturbing political geographies nearby the country, Iran showed good numbers in automotive sales and production. For instance,

In 2020, the passenger cars production in Iran registered 826,210 units with a rise of 7% compared to the previous year. Full-year sales for passenger cars in 2020 have been recorded at 816,497 units, reporting an 8.7% increase in sales compared to 2019

Moreover, with increasing demand for passenger cars in the country, the major OEMs are planning to launch latest models. For instance,

In February 2020, Iran Khodro made an announcement that the company is going to launch 9 new vehicles in the country in the coming 3 three years. The company announced Rana Plus, Soren Plus, Samand Optimal, Automatic Dana Plus, and Peugeot Panorama are five models that will be developed in the upcoming years, while K132s, Crossover K125s, and Hatchback K121s, as well as a Hybrid Dena, will also be launched by January 2023.

Latest Developments to Encourage Engine Manufacturers in Iran Automobile Industry

Iran’s automotive engine and engine components have considerably increased during the past several years with fast growth in population and need for vehicles. In its 2025 grand economic plan, Iran aims to become the number one automotive industry of the Middle East region, aiming to rank fifth in Asia and eleventh globally.

Primary factors contributing towards the increase in production activity in auto parts and components are the government’s support plans for the auto sector, increasing skilled and educated workforce, and huge potential for private sector investments.

The two biggest automakers in Iran, IKCO and SAIPA together developed in-house capabilities with their experience of making engines for international OEMs. Together both companies have manufactured about a million engines in 2018 alone for their various vehicles.

With homegrown engine manufacturing established to meet the growing demand of vehicles in the country, and EV adoption still being in early stages, the market is expected to grow positively during the forecast period. For instance,

Renault set up a local engine manufacturing plant in Iran in 2017 with a joint venture with Parto Negin Naseh (Negin Holdings) and the Industrial Development & Renovation Organization of Iran (IDRO).

Therefore, in light of above-mentioned instances, engine segment of Iran automobile industry expected to witness positive growth over the forecast period.

Competitive Landscape

Iran’s Automobile Industry is fairly consolidated market. There are many major local players in the country, such as IKCO, SAIPA, Pars Khodro, Kerman, and Bahman, who manufacture a variety of different models (such as Samand, Tiba, Dena, etc.). IKCO and SAIPA are the biggest automotive manufacturers. Many players are in planning to ramp up production output in the coming years. For instance,

In June 2020, To boost local manufacturing, IKCO launched 175 projects to strengthen the auto part localization and cut down the import expenses by EUR 246 million.
In January 2020, the Iranian government announced it has launched a heavy-duty truck manufacturing plant. The first phase of the plant for the production of Chapar (Carrier) trucks, which started operation in Meshginshahr in Northwest Iran. The plant will produce 50 trucks a day at full production.
In October 2019, Sazehgostar SAIPA signed an agreement worth IRR 180 billion (USD 1.6 million) with a local knowledge-based firm Pars Iranian Saman, for the domestic production of car lamps.

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