Senior visiting fellow, George Mason University
As Iran’s domestic carmakers lose money due to sanctions, a technological gap and mismanagement, officials are promising to boost the electrical vehicle production.
The only avenue open to Iran is to make deals with Chinese companies and start EV assembly, like fossil-fuel vehicles it produces.
China, dominating the global electric vehicle (EV) manufacturing landscape, holds the largest market share among the top five producers in 2023. Germany and the United States trail, while France and the UK see a rise in EV production. Collectively, these nations wield substantial influence on the global EV manufacturing scene.
The recent UN Climate Change Conference, COP 28, emphasized international efforts to combat climate change, with a focus on EV adoption and greenhouse gas reduction. Major EV brands like Tesla, Kia/Hyundai, and Mercedes spearhead the transition to battery power, while newcomers such as Rivian diversify the market, influencing its ongoing evolution.
In Iran, IKCO introduced the Tara EV, the country's inaugural all-electric vehicle, set for release in March 2024. Developed by IKCO's Jetco division, the Tara EV boasts a 45-kWh battery pack, providing a 300 km range on a full charge. Iran's Minister of Industry, Abbas Ali-Abadi, announced plans for three locally produced EV models by the first half of the upcoming Iranian year (beginning in March).
With ambitions for increased EV manufacturing and imports to meet rising demand, the government aims to deploy 100,000 electric taxis in key cities this year that suffer from chronic air pollution. Significant projects, including the launch of Oxygen, Iran's first all-electric car, and MAPNA group's plan for 20 EV charging stations nationwide.
However, Iran grapples with challenges within its auto sector, encapsulated by the term "Car Mafia." This network, alleged to thrive due to the state-owned auto sector's monopoly and inadequate government oversight, faces accusations of financial wrongdoing, evading US sanctions, and contributing to mismanagement. The "car mafia" obstructs the import of reasonably priced cars, manipulating the production of pricier, inferior local vehicles. This term encapsulates various issues within Iran's auto sector, including the impeachment of the industry minister and corruption allegations, portraying it as a formidable and dishonest force negatively impacting the auto industry and vehicle quality.
China’s Dominance in Iran Future EV Market
China's dominant position in the EV industry poses a significant challenge for Iran's plans, particularly concerning the production and processing of essential minerals like cobalt. The reliance on China raises doubts about the feasibility and affordability of Iran's comprehensive EV strategy, emphasizing the need to address China's hegemony over critical minerals for a reliable supply chain.
Global concerns emerge as China's control over vital minerals triggers reactions and export restrictions, impacting the global EV supply chain. The US responds with proposed regulations to limit tax breaks for EVs using minerals or batteries manufactured in China, reflecting the international repercussions of China's dominance in the EV sector.
Despite China and Iran's intentions to collaborate on EV manufacturing, Iran faces challenges in providing sufficient electricity for EV charging amid a natural gas crisis. The gas shortage would impede widespread EV adoption, necessitating steps to encourage renewable energy, which is substantially underdeveloped in Iran.
While automobile companies in Iran claim to be jointly producing electric cars with China, studies indicate that, in the current situation, most automobile companies in Iran are not profitable. Due to government meddling, Iran's state-owned automakers suffer significant losses of $3.7 million a day, or more than $1 billion annually. These automakers battle with demand while being huge businesses, which drives up prices. The issues are made worse by mismanagement, corruption. It will need quick action at the highest governmental levels to stop the car industry from collapsing and to find solutions to its problems.
Concerns about transparency arise in the Iran-China joint development of electric vehicles (EVs), especially considering the paucity of detailed information. This lack of openness raises the possibility that certain Iranian automakers, dubbed the "car mafia," might exploit the circumstances to import EVs rather than actively supporting home production.
The potential dominance of the Chinese in Iran's EV industry and the nation's reliance on vital minerals for battery manufacture underscore the serious flaws in the partnership. The success of Iran's EV plan depends on a clear roadmap, transparent implementation, and strict regulations to counter opportunistic activities in the automotive sector.
To advance a sustainable EV policy in Iran, a commitment to openness, robust regulation, and a shift towards renewable energy sources is essential. Immediate investments in EVs and addressing transportation industry challenges are crucial, emphasizing the need for a proactive and transparent approach to ensure the success of Iran's EV plan.
