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Subscriptions help us deliver original coverage of the region's most important issues.Western sanctions on Moscow over its Feb. 2022 invasion of Ukraine have provided Iran’s top carmakers with an opportunity to re-enter the Russian market. Iran Khodro (IKCO) vehicles made a new debut in Russia in July, and Saipa is expected to launch a range of cars later this year.
While Russian importers see an opportunity to fulfill demand for budget cars, experts have explained to Amwaj.media that international factors—combined with an altered approach from Iranian manufacturers—will determine whether these vehicles can compete against cheaper Chinese and Russian alternatives.
Saipa recovering from false start
Saipa is the second largest automotive manufacturer in Iran. At the beginning of 2023, a newly established Russian company called Best-Motors pledged to introduce 1,000 Saipa vehicles to the Russian market by June and initiated an extensive promotional campaign.
While the news garnered media attention, the cars failed to arrive in Russia as scheduled.
Abbas Mirzaei Ghazi represents Iran at the Eurasian Business Council. He explained to Amwaj.media that Best-Motors is no longer responsible for bringing Saipa vehicles to Russia, following unsatisfactory financial risk assessments it conducted. Another company—Best-Avto—is now expected to step in.
According to local media, Saipa also signed a contract with the Belarusian company Lucky Currency to distribute Iranian cars in both Belarus and Russia. The company’s CEO, Sergey Vachinsky, disclosed to Amwaj.media that it delivered several cars to Russia in August for use in exhibitions and crash tests. He added, "By October, we will make 500 cars available for sale."
To import more than 1,000 cars, each model must receive a Vehicle Type Approval Certificate (OTTS), demonstrating that it meets relevant technical and safety regulations set by the Eurasian Economic Union. "We plan to obtain OTTS in Belarus this year, which will also be valid in Russia,” Vachinsky told Amwaj.media.
Lucky Currency’s CEO identified the Lada Granta and Lada Vesta, both produced by Russian manufacturer Avtovaz, as the primary competitors of Saipa vehicles. "We intend to sell the Saipa Quik for approximately 13,500 USD, the Saipa Saina for 14,000-14,500 USD, and the Saipa Shahin for 20,000 USD," he stated.
By comparison, the official Lada website currently lists car prices starting at around 7,500 USD, with the highest-priced models costing 17,000 USD.
Vachinsky also told Amwaj.media that there are plans to launch Saipa car assembly operations 10 km (6.2 miles) outside Minsk, the capital of Belarus. In his estimate, such a step will reduce Saipa car prices by approximately 2,000 USD per vehicle.
Separately, Mirzaei Ghazi—the Iranian representative at the Eruasian Business Council—claimed that there are plans to assemble Saipa Zamyad pickup trucks near Moscow. However, details and timelines for both projects are unclear, and the outlook for assembly prospects will only become apparent after Saipa cars go on sale in Belarus and Russia next month.
Iran Khodro needs local assembly to cut costs
Iran Khodro is the largest auto manufacturer in Iran. Its vehicles are sold in Russia through top car dealership Rolf and imported by Mamarusa.
Alexey Zhilin, the commercial director of Mamarusa, told Amwaj.media that his company has brought 114 Iran Khodro cars into Russia through parallel imports—including the Dena and Tara—to assess sales prospects and initiate the certification process. "We plan to acquire an OTTS certificate for the Tara model, priced at approximately 21,000 USD, by the end of this autumn," he stated.
Iran Khodro and other Iranian manufacturers face the challenge of remaining competitive in Russia while also demonstrating via OTTS certification conformity with local technical requirements. More established European brands by contrast have not required OTTS certification since Russian import rules were relaxed in 2022 in response to western sanctions.
In this regard, Russian dealers are also interested in the Peugeot 207, which since March this year no longer requires an OTTS certificate and costs around 3,000 USD less than Iran Khodro’s Tara model.
There is, however, room for Iranian cars to become more competitive in Russia. Zhilin believes the introduction of Semi Knocked-Down (SKD) assembly in Russia could potentially reduce the cost of vehicles by around 15%. “Although specific agreements are not in place yet, several options are under consideration, and we plan to initiate this assembly process by the end of 2023,” he added.
The establishment of a permanent free trade zone between Iran and the Eurasian Economic Union, which some officials believe could become a reality this year, could also cut import duties for Iranian cars by a further 15%.
Amwaj.media reached out to both Iran Khodro and Saipa but representatives of the companies declined comment.
Experts weigh in on Iran auto prospects
As Iranian automakers are moving to enter the Russian market, Sergey Kanaev—head of the Federation of Car Owners of Russia—told Amwaj.media that "the only advantage of these cars is that the Iranian industry is not affected by western sanctions against Russia, ensuring a supply of vehicles and parts."
Iran-made cars could become more important, according to Kanaev, if China's automotive supply is disrupted. "It is possible that trade could reach a relatively good level for these Iranian companies.” Nevertheless, Kanaev does not believe they will be able to capture a significant share of the Russian market.
Igor Morzharetto, a partner at the Russian analytical agency Avtostat, believes Iranian carmakers have an opportunity to shake up the budget car market in Russia, which is currently dominated by Avtovaz. "Iranians offer outdated yet reliable and proven vehicles with good design—they may not sell millions of cars, but tens of thousands is a plausible goal," he predicted.
At the same time, he told Amwaj.media that Iranian carmakers would benefit considerably if they established local vehicle assembly operations in Russia, saying that "the pricing of Iranian cars would then be only slightly higher than Avtovaz.” As things stand, Morzharetto noted, “Direct imports, coupled with high Russian customs duties and recycling fees, make these cars overly expensive.”
Learning from the past
This is not Iranian carmakers’ first attempt at entering the Russian market. In fact, Lucky Currency’s CEO told Amwaj.media that Saipa’s plans to launch car assembly operations near Minsk would utilize a car factory previously used for assembling Iran Khodro cars in the 2000s.
Speaking to Amwaj.media on condition of anonymity, a former advisor to a leading Iranian car manufacturer said, “12,000 cars were sold in Russia between 2006 and 2008, and the distributor in Russia could have sold at least 15,000 cars annually." Amwaj.media was unable to independently verify these claims.
The source said he believes two factors caused Iran Khodro to disengage from Russia. On the one hand, Russian authorities tightened emissions standards in 2008. Meanwhile, bigger domestic demand in Iran—coupled with favorable conditions for Iranian manufacturers, including import duties and other charges which increased the prices of foreign vehicles by 120%—meant there were less financial incentives to export.
Today, President Ebrahim Raisi is keen to show that his administration can revive Iran’s economy without a nuclear deal with the west. Meanwhile, as the former advisor noted to Amwaj.media, the Islamic Republic needs foreign currency to import essential goods. Despite the many challenges, Iran’s interest in the Russian auto market can thus be expected to increase.