Electric vehicle regulation and law in Iran

The Iranian government has been working on developing and implementing plans to facilitate and encourage the use of EVs in the country for several years. With air pollution in larger cities increasingly becoming a national crisis, the motivation to speed up these plans has increased. However, numerous challenges have meant that, with very few exceptions, plans to increase the share of EVs in the market or in the public transport fleet remain unrealised.

1. What EVs have been deployed in your jurisdiction to date?

Several models of hybrid passenger cars (most prominently from Toyota, Lexus and Hyundai) have been cleared for import into the country. There is no exact figure of all hybrid cars that have been registered to date. However, the overall share of imported vehicles has not been significant, with 5,500 announced as having been imported in the period between March and December 2017, equalling 0.05% of the total number of imports. Often cars that have been brought into the country have not been registered.
Electric motorcycles are slowly making their way into cities like Tehran and Esfahan following incentives offered by municipalities. In this case too, the exact number of registered vehicles is unclear. In some of these cities, pilot projects for electric vans and mini buses have also been launched.

Local manufacturers have introduced prototypes of domestically built EV cars and motorcycles, but none have begun mass production yet.

Plans to introduce EV taxis and buses have been announced, but are still not implemented.

2. Is there any specific legislation for/regulation of EVs in your jurisdiction?

Several pieces of legislation and directives contain provisions that directly or indirectly impact the importing, manufacturing and use of EVs, but there is no legislation that specifically deals with them.

The recently-adopted Clean AirAct (2017) mandates various ministries to work together on renewing the urban public transport fleet, including through incentives for hybrid and electric vehicles and electric motorcycles. It also exempts all locally-manufactured EVs from VAT.

The Cabinet of Ministers has requested the Ministry of Industry (MoI) to prepare an action plan for manufacturing and importing EVs. The MoI subsequently introduced a plan for manufacturing EVs that prioritised the public transport fleet, and set a three-phase project for passenger vehicles to be manufactured on new and existing platforms. The MoI also proposed an initiative to offer incentives to manufacturers and consumers of EVs, which is pending adoption by the Cabinet of Ministers.

EV import tariffs – are a significant factor as they are among the few incentives available – they are also set by the Cabinet. The most recent resolution increased the previously low tariffs from 5% to 45-100%.

3. What measures promote EVs in your jurisdiction?

For imports, the main incentive offered has been lower import tariffs compared to traditional vehicles. The Cabinet increased these tariffs in December 2017. The new resolution is currently pending a review by the Court of Administrative Justice.

In line with the emphasis put on local production in the auto industry, the Clean Air Act has laid the ground for offering incentives to domestically-manufactured EVs. As a first step, domestically-manufactured EVs are exempt from VAT. But, as local manufacturing is still in the early stages, concrete incentive packages are yet to be announced.

Some cities are taking the lead by offering incentives of their own. In Tehran, EVs are exempt from traffic restrictions in the central parts of the city. The municipality is also offering loans for electric motorcycles and is planning to designate zones in the city where non-electric motorcycles will not be permitted.

4. Who are the main entities (e.g. developers, government, System Operator) and what are their roles in the deployment of EVs in your jurisdiction?

There are several entities that play a role in the deployment of EVs:

  • Department of Environment – the organisation with the general mandate to promote environmental-friendly technology and improve air quality. It is responsible for setting emissions standards and for proposing and implementing financial incentives for EVs.
  • The MoI – plays a key role in regulating both the importing and manufacturing of EVs, including supporting and incentivising the major manufacturers.
  • The Ministry of Energy – along with its affiliates, is responsible for supplying and regulating the supply of power to EVs. Current projects include providing the infrastructure for charging stations.
  • Municipalities and city councils – can and in some cases have used their authorities and funds to offer incentives for EVs. They also play a role in increasing the use of EVs in the public transport fleet of urban areas.
  • Universities and research institutes – have been active in research and design projects for EVs. The Power Research Institute (overseen by the MoI) has established a department dedicated to EVs. The institute conducts and supports research, and has been working on standard guides for EVs and their parts – the lack of which is a contributing factor for not registering EVs – and charging stations. The institute introduced a 10-year projection that foresees 2,500 charging stations, 1.2m electric cars and 600,000 electric vehicles to be in use by 2025.
  • Local manufacturers – play a role by taking steps to design and manufacture EVs.

In addition, some committees and working groups have been established to facilitate coordination among various ministries and governmental organisations.

5. What are the main challenges to further deployment of EVs in your jurisdiction? How have EV developers sought to overcome these challenges to date?

Price is a major challenge both for the use and manufacture of EVs in Iran. For imported EVs, the change in tariff incentives, in the absence of other incentives, would mean an upsurge in the price. Local manufacturing is also hampered by production costs that are unfeasible without significant government support.

In spite of years of research and several prototypes designed in Iran, mass production without the use of foreign technology and investment is still not a realistic goal.

Lack of infrastructure for charging EVs is a barrier. Plans to build charging stations in larger cities are under way, but apart from pilot projects the plans are not yet realised. The urban grid is also unable to support charging EV batteries.

Standardisation of EVs is a challenge that has prevented their registration. A national standard guide is being prepared to address this problem.

Administrative efficiency has also been a challenge. The fact that several governmental entities play a role in this area, some with overlapping authority, has slowed down the progress of legislation and its implementation.

Maryam Abaei