An unaffordable car market highlights Iran’s cost-of-living crisis

Tehran, Iran – Hossein, a ۳۲-year-old marketing specialist based in Tehran, has been thinking of replacing his ۱۳-year-old Iranian-made car with a newer model.

Even though he earns about four-and-a-half times the minimum wage after a recent pay rise – his salary is now close to ۹۰۰ million rials (about $۳۹۰ at the current exchange rate) – imported vehicles are not even remotely affordable for him.

Even finding a locally made car might be out of his budget, with an economic crisis gripping the country since the United States and Israel launched a surprise war on Iran on February ۲۸ and later enacted a crippling siege and sanctions on the country.

“I’m losing hope of ever being able to buy a new domestic production car too, unless the country opens up and becomes a bit more normal again,” Hossein, who asked to keep his full name confidential for security reasons, told Al Jazeera.

His old manual Peugeot ۲۰۶ model, an originally French-made car but now produced domestically after foreign counterparts left Iran due to sanctions, can fetch up to ۱۰ billion rials ($۴,۳۵۰) if he sells it towards making a new purchase. However, his replacement options are limited.

Upgrading to a slightly improved Peugeot ۲۰۷ with an automatic gearbox could cost him ۲۸ billion rials ($۱۲,۱۷۰) now. This means that, after selling his car, he would need more than ۲۰ months of his entire salary.

A domestic sedan Shahin model costs more than ۳۱ billion rials ($۱۳,۴۸۰), and a crossover Reera is priced at more than ۴۳ billion rials ($۱۸,۷۰۰).

With these options, he would need to save about ۲۴ months and ۳۷ months of his whole salary, respectively, and that is if prices remain stable and he does not spend a rial on anything else. But the reality of the fast-rising living costs and lagging incomes in Iran means he can barely put aside any money, let alone afford a new car.

Domestic car prices have mostly risen ۴۰ to ۸۰ percent since the start of the war, while some vehicles sell for more than ۱۳۰ percent of their September ۲۰۲۵ costs.

The costs of maintaining the vehicles are also rising much faster than people’s salaries. Domestically produced tyres, motor oil, brake pads and clutch kits have at least doubled since last year, with some car parts having more than tripled in price.

Domestic vehicles have generally low safety standards, meaning that they contribute to staggering road accident deaths. At least ۱,۶۰۹ Iranians have been killed so far on intercity roads in the current month of Shahrivar of the solar Hijri calendar, which ends on September ۲۲. More than ۲۰,۰۰۰ people lose their lives on the roads every year. In comparison, fewer people in the whole of the European Union, nearly five times Iran’s population, died on roads last year.

Iran’s fuel-guzzling cars also contribute to smoke-congested city streets, degrade vehicles faster and increase fuel costs, just as petrol prices have risen for users.

How did we get here?

Experts say, due to a combination of protected state-linked businesses, privileged access, economic isolation and a curtailing of imports, Iranian households have no choice but to pay exorbitant prices – compared with their salaries – to buy low-quality cars.

The damage from the war, including the extensive bombing of multiple steel giants by Israel and the US, has only added insult to injury. The naval blockade of Iran’s southern ports has prevented goods coming in from popular neighbouring markets like the United Arab Emirates.

Under such circumstances, domestic vehicle manufacturers have little incentive to improve.

End customers are also beset by government charges, currency and financing costs, margins levied by murky intermediaries – and in numerous documented cases, industry corruption.

“People are forced to buy expensive low-quality cars whose real prices should be a quarter of global prices, and this is a direct harm done to them,” Mohammad Rashidi, a member of the presiding board of Iran’s parliament, told local media on Saturday. “The traces of a mafia system are visible throughout the process.”

His claims echo those of other officials and state-linked media, who have openly described the industry as resembling an organised crime operation.

According to the latest figures released by state media, about ۲۳۳,۰۰۰ cars were manufactured or assembled in Iran in the first five months of ۲۰۲۶, compared with ۳۶۶,۰۰۰ the year before. Only about ۲۵,۰۰۰ vehicles were imported in that period.

Only a handful of state-linked companies or intermediaries are allowed to import vehicles, with duties plus value-added tax increasing final prices up to ۲۰۰ percent.

The government and parliament have discussed lowering import tariffs this year, with no agreement announced so far.

The premiums are more visible for high-end cars, with a ۲۰۲۶ Toyota Land Cruiser VXR going for approximately ۶۶۰ billion rials ($۲۸۷,۰۰۰) in Iran at the moment, while the same model is available for about $۸۶,۰۰۰ in the UAE. The same story applies to most other models, at different rates depending on the rarity of the vehicle and the availability of parts.

The price of a mid-range Chinese-designed SUV sold as Exeed VX in international markets is listed at about $۳۲,۰۰۰ in China, while it is priced at about $۴۲,۰۰۰ in the UAE. The same car, assembled from imported parts by a state-linked company in Iran under a different name, currently costs Iranian customers the equivalent of $۵۳,۰۰۰.

The bizarre situation was on full display during a three-day “international” car exhibition in Tehran last week that mostly featured Chinese-manufactured vehicles. These remain available in Iran despite the US sanctions, since Tehran exports almost all of its oil to China and barters this for goods, including cars.

Some domestic manufacturers and importers were absent, either because they had no products to offer or because they had angry customers who registered months ago to get vehicles they never received. Spare parts for some of the vehicles on display are currently either not available in the Iranian market or cost several times their price in international markets.

Even the cheapest vehicles offered at the exhibition were completely unaffordable to the average Iranian. It would take a worker on the minimum wage with standard allowances ۵۰ years to buy an XPENG G۹, a Chinese-made electric SUV priced at ۱۲۰ billion rials ($۵۲,۱۵۰), on his or her salary, without spending a rial on food, housing or clothing.

Still, there were huge queues outside the exhibition centre each of the three days.

“It was sad because most people just came to take pictures with the cars they knew they could never afford,” a young man who attended the exhibition told Al Jazeera. “The doors of the cars were locked too.”