Over the past month, and during the initial days of the Iranian calendar year (which commenced on 21st March), Iran's automotive market has experienced considerable instability.

The unchecked increase in the prices of both domestic and imported vehicles in the open market has raised concerns among members of the public and economic analysts.

According to many experts, the main contributing factors include ineffective policymaking, high levels of government taxation, persistent inflation, the continued depreciation of the rial against the US dollar, and the monopolistic control exercised by domestic car manufacturers.

The prices of imported vehicles have risen sharply in recent weeks. For instance, the lowest-priced used imported car currently available in the open market is valued at no less than IRR 18 billion (US$ 17,100).

Meanwhile, some high-mileage SUVs are now priced above IRR 40 billion. Since the beginning of the new year, the price of certain imported models has increased by up to IRR 4 billion within a period of just 20 days. This price surge has occurred despite reports from automotive industry sources indicating a stagnant market with limited buyer activity.

The situation with domestic cars is not much better. Price reviews show that the Peugeot 206 Type 2, which was trading at around IRR 6 billion in March, has now surpassed IRR 7.2 billion. The Saina EX has increased by IRR 200 million in just four days, reaching IRR 4.45 billion. The Shahin, one of the most affordable models produced by SAIPA, has also exceeded IRR 6 billion in the open market, and its Plus version is being sold for at least IRR 6.5 billion.

What has led to public concern is the gap between car prices and the income of salaried workers. This year, the minimum official wage for workers has been set at about IRR 111 million, a figure that does not cover the monthly instalment of a low-cost domestic car. For Iran's working and middle classes, owning an affordable car has become increasingly difficult.

Causes of the uncontrolled surge in car prices

Experts believe the continuous rise in car prices in Iran stems from various factors, the most important of which are chronic inflation and economic instability. In an environment where the exchange rate constantly fluctuates and monetary and fiscal policies lack clarity and stability, the car market is often one of the first sectors to react to economic shocks.

Another major factor is the car manufacturing monopoly. For years, Iran's auto market has been dominated by two large state-owned automakers, Iran Khodro and SAIPA, or companies managed by their executives.

The import of foreign vehicles is also heavily restricted and controlled by these same domestic car industry managers. Under such conditions, the lack of competition has allowed domestic car prices to rise continuously, without improvements in quality or standards. These two companies, which are affiliated with the Islamic Revolutionary Guard Corps (IRGC), also control the production, distribution, and import of cars and their parts.

Restrictions and delays in importing vehicles, especially economical and fuel-efficient ones, have exacerbated the problem.

While many countries balance their markets through strategic imports and reasonable tariffs, in Iran, car imports over the past decades have faced numerous obstacles and heavy duties, alongside a domestic industry that lags behind modern automotive technologies.

Even during brief periods when imports were allowed, the vehicles that entered the market were few and more expensive, making no significant impact on reducing prices.

The rise in car prices, alongside increases in the cost of other essentials, has made car ownership unaffordable for Iran's middle class.

Runaway inflation, a production monopoly, import bans and restrictions, chronic inflation, and weak oversight are the main reasons behind the current situation.

Reports have indicated that the rising prices of Iran Khodro and SAIPA's products directly influence the offers made by sellers in the open market. This price hike has essentially become an annual routine for the automakers.

Based on their own justifications, they cite the rising exchange rate and increasing labour costs as reasons for raising factory prices. As a result, even within the first few days of the new year, the prices of domestic cars in the open market have increased.