Despite promises made in recent years by the Iranian government to import green cars into the country, little or no effort has been made since the local auto industry is mostly state-owned.
In the past two years, for example, not a single electric vehicle (EV) has been imported into Iran. And from 2021, only 15,000 low-cost cars have been imported, instead of the promised 300,000. Not even efficient new vehicles or hybrid models have been imported.
In 2017, Iran imposed a ban on car imports, citing the imperative to preserve foreign exchange reserves. The ban is said to have been introduced as a measure to reduce the cost of imported vehicles and to preserve the country’s foreign exchange reserves.
Meanwhile, Iran’s domestic automakers, owned by the government and its affiliates, produced an estimated 1.2 million vehicles in 2023, all of which were gasoline-powered.
Calculations by Iran International show that the cost of refueling an electric vehicle (EV) in Iran will amount to only a quarter of the cost of gasoline purchased at government-set prices.
This is notable as Iran has been grappling with gasoline shortages since mid-2022, prompting the start of fuel imports — pushing the country’s annual gasoline subsidies to more than $10 billion.
And yet, despite the rapid growth of the global electric vehicle market, the Iranian government has shown no interest or desire to import electric vehicles.
Global EV markets and energy costs
In 2023, the global electric vehicle market witnessed a staggering surge of 37%, capturing nearly 15% of the total automotive market share globally.
By 2030, two-thirds of new car sales on the market are expected to be electric cars.
There are currently about 27 million electric cars on the world’s roads, and their electricity consumption is about 110 to 120 terawatt hours per year (TWh/year).
Today, there are 16 million cars in Iran, mostly locally produced, that consume 110 million liters of gasoline per day. They are based on older foreign models with inefficient engines and high pollution.
Thus, if Iran were to import even one million electric cars, their electricity consumption would be about 4 TWh/year, which equates to approximately 1% of the country’s electricity production.
Meanwhile, Iran faces both gasoline shortages and severe air pollution.
A significant part of the country’s air pollution is due to domestically produced cars, with a much higher fuel consumption of 16 litres/100 km – almost twice the global standards.
On the other hand, only less than a quarter of Iran’s domestically produced gasoline meets Euro 5 and Euro 6 standards.
Iranian cars also consume 20 million cubic meters of compressed natural gas (CNG) daily.
According to the International Energy Agency, Iran had about $50 billion in hidden subsidies for petroleum products, $45 billion for natural gas and $30 billion for electricity in 2022.
In a simple word, the difference between domestic and foreign selling prices of Iran’s petroleum products, gas and electricity is about $125 billion in 2022, which is equivalent to one third of the country’s GDP.
Gasoline has a 25% share in the production of Iranian refineries. Iran then had about $12.5 billion in hidden gasoline subsidies in 2022.
If Iran were to import 1 million cars – excluding the additional costs of building infrastructure – the hidden subsidy to their electricity demand would be only $300 million per year.
EV vs Gasoline in Iran
On April 1, Mustafa Rajabi Mashhadi, CEO of Iran’s state electricity company, announced that the energy ministry plans to build eight electric car charging stations in Tehran. But the price of electricity will be determined using higher commercial tariffs, at 5,470 riyals (less than 1 cent) per kilowatt hour.
At the moment, there are no published announcements about the start of construction of these stations.
Moreover, the rationale behind Iran’s decision to calculate electricity prices for electric cars at commercial prices remains unclear, especially given the significant subsidy provided for gasoline.
Nevertheless, potential future owners of electric cars in Iran can still expect significantly lower energy costs compared to gasoline-powered vehicles.
At the current rate, an electric car consumes an average of 0.2 kilowatt-hours of electricity per kilometer – so the cost of driving an electric car for 100 kilometers in Iran will cost about 18 cents.
The cost of fuel for every 100 kilometers of driving with free gasoline is about 80 cents, and with quota gasoline it is half that figure.
Therefore, using an electric car would be much more economical than a gasoline car in Iran.
Government opposition due to state monopoly
The real reason for the government’s reluctance to import cars seems to stem from the fact that approximately 80% of domestic cars are manufactured by state-owned car companies.
As a result of the monopoly held by state-owned companies in the automobile market, Iranians are forced to buy low-quality, expensive vehicles with high gas consumption.
Saeed Tajik, CEO of Iran Quality and Standard Inspection Company, told the Economics Online website on April 1 that Iran’s Ministry of Industry, Mines and Trade has expressed interest in importing electric cars. However, the Ministry of Energy has raised concerns about this proposal due to the electricity shortage.
During the summer months, Iran faces a deficit of 14,000 MW of electricity, while in other seasons there is no deficit.
In addition, Iran boasts an estimated 2.5 TWh of net electricity exports, valued at around $300 million in 2023, an amount that could meet the energy needs of 625,000 electric cars each year.
Iran’s current electricity production is approximately 390 TWh, but 13% of this (over 50 TWh) is lost due to deterioration of the power grid. Tajik also stressed that the reality is that Iran does not have the necessary infrastructure for electric cars.
To justify the ban on the import of electric vehicles, he also cited the fact that electricity produced in Iran is not environmentally friendly. Approximately 80% of Iran’s electricity generation comes from thermal power plants that burn large amounts of gas, fuel oil and diesel.
According to official statistics from the Ministry of Energy, more than 94% of the country’s electricity generation came from thermal power plants in the last fiscal year, which ended on March 19. Despite government projections to add 2,500 MW of renewable energy capacity over the same period, only 75 MW of planned capacity has been implemented, representing less than 3% of the planned target.
Meanwhile, President Ebrahim Raisi’s government says it has earmarked the installation of 4,500 MW of new solar and wind farms this year.
