Iran Market – Chinese Brand Resilience and Structural Opportunities Under Sanctions and Conflict

Iran is one of the most unique automotive markets globally. Due to long-term international sanctions, most mainstream European, American, Japanese, and Korean brands are unable to enter, making this market a long-established stronghold for Chinese automakers. With a population exceeding 88 million, Iran is the largest automotive consumer market in the Middle East, with a market size of 1.14 million units in 2024, accounting for 38 percent of total regional sales.

From late 2025 to early 2026, following joint US-Israeli military strikes, Iran experienced sustained unrest. Protests spread nationwide, with the government implementing nationwide internet shutdowns and airspace closures. The Iranian rial experienced cliff-like devaluation, and hyperinflation severely weakened consumer purchasing power. External sanctions continued to tighten, parts imports were restricted, logistics costs surged, and the operating environment deteriorated sharply. From January to February 2026, Iran's vehicle import sales plummeted over 70 percent, with Chinese brand market share briefly falling below 5 percent.

Most automakers have chosen to withdraw. Geely exited the Iranian market in January 2026, BYD significantly scaled back operations, and Chang'an's CKD assembly project came to a complete halt, maintaining only limited imports and after-sales support through an asset-light model. A few companies remain, with Chery choosing to deepen cooperation and maintain basic operations. According to Bernstein analysis, Chery Group still holds approximately 6 percent market share in Iran, the highest among Chinese brands in the country.

On the regulatory front, the Iranian government is promoting structural adjustments to vehicle import policies. The new budget proposal significantly reduces import tariffs on certain vehicle categories, with hybrid vehicle tariffs reduced from 100 percent to 40 percent, sub-1.5-liter fuel vehicles from 110 percent to 40 percent, 1.5 to 2.0-liter from 120 percent to 70 percent, pure EVs maintaining a 4 percent low tariff, and plug-in hybrids maintaining 15 percent. The tariff reductions create new policy space for Chinese brands' supply of economy fuel vehicles and hybrids.

The dramatic transformation of Iran's market is redefining the survival logic for traders. Under sanctions, traders capable of maintaining stable supply, ensuring parts availability through compliant channels, and precisely matching vehicle demand under new tariff policies are becoming scarce resources in Iran's vehicle import market. While Chinese brand market share faces short-term pressure, the demand-driven market base remains intact. With 2.6 million vehicles over 20 years old urgently needing replacement, annual replacement demand of hundreds of thousands of units is forming a stable market foundation.


FAQ

Question 1: What is the size and position of Iran's automotive market?

Iran has a population exceeding 88 million and is the largest automotive consumer market in the Middle East, with a market size of 1.14 million units in 2024, accounting for 38 percent of total regional sales.

Question 2: What changes occurred in the Iranian market from 2025 to 2026?

Following joint US-Israeli military strikes, sustained unrest, cliff-like rial devaluation, hyperinflation severely weakening purchasing power, restricted parts imports, and surging logistics costs. Vehicle import sales plummeted over 70 percent from January to February 2026.

Question 3: What is the current status of Chinese brands in Iran?

Geely exited in January 2026, BYD significantly scaled back, and Chang'an's CKD project halted. Chery has chosen to deepen cooperation and maintain basic operations, holding approximately 6 percent market share, the highest among Chinese brands in Iran.

Question 4: What are the new changes in Iran's vehicle import tariffs?

Hybrid tariffs reduced from 100 percent to 40 percent, sub-1.5-liter fuel vehicles from 110 percent to 40 percent, 1.5 to 2.0-liter from 120 percent to 70 percent, with pure EVs maintaining a 4 percent low tariff.

Question 5: What is the basis of Iran's rigid market demand?

2.6 million vehicles over 20 years old urgently need replacement, with annual replacement demand of hundreds of thousands of units forming a stable market foundation.

Question 6: What services does LHZ Auto Iran Operations Center provide?

LHZ Auto Iran Operations Center (www.lhzauto.ir) focuses exclusively on B2B wholesale, leveraging the Group's TIR logistics network to precisely match vehicle demand under Iran's new tariff policies, providing full-chain trade services from needs analysis, model matching, compliance certification, to customs clearance and delivery.


LHZ Auto Iran Operations Center ｜ Website: www.lhzauto.ir ｜ Guangzhou Nansha: 15220000555 ｜ Khorgos: 19259087888 ｜ Email: china@lhzauto.com