The first Model T Ford's, known locally as smoke carriages, arrived in the 1930s. By 1955, some 10,000 vehicles were imported annually. In 1958, the first local assembly line came on stream (Jeep) while in 1963, Britain's close association with the Iranian automotive industry commenced with the local assembly of Land Rovers and Moratt. The industry expanded rapidly in the 1970s after OPEC led oil shocks quadrupled Iran's oil income. In 1979, Iran became the only country outside the US to assemble Cadillacs. Imports also grew as domestic manufacturers struggled to keep pace with demand. Iran's love affair with the car had begun.
The Islamic revolution of 1979 and the Iran/Iraq war (1980-88) had far reaching consequences. All domestic automotive manufacturers were nationalised in 1979 in what was supposed to be a temporary measure. The Iraqi invasion in 1980 encouraged the creation of a centrally planned economy to direct production towards essential war goods. Domestic demand for cars dropped during the 1980s, as did investment and output.
Following the end of the war, demand soared. So too did oil prices. Imports rose to record levels in 1993/94 with up to 90,000 vehicles arriving annually. But the Iranian economy was in trouble as vast quantities of consumer goods were sucked in. Iran haemorrhaged foreign exchange and built up substantial foreign debt. Drastic action was required to remedy the ailing economy.
In Early 1993, as part of a series of measures to address the nation's economic ills, the Automotive Law of Iran was enacted. This introduced stiff import tariffs. It also introduced tax breaks and other incentives for manufacturers to increase the local content of domestically produced vehicles.
