Importers need to set up local companies or representative offices in order to trade their cars. They also need to offer after-sales services and to get permits from two government bodies. So far, five companies have done this and have permits pending to import 35 models. Potential importers include: Toyota Motor Corporation and Mitsubishi Corporation, both of Japan, Germany's BMW, Russia's Lada and South Korea's Daewoo Corporation.

The tariff regime will levy a 170 per cent charge on vehicles costing IR 44 million ($5,200) or more and an additional 10 per cent charge on every further IR 22 million ($2,600). 'Under the new rules, a foreign car worth $25,000 will sell in Iran for at least $85,000,' says Shahram Sadeghi, associate director of the local Atieh Bahar Consulting. 'There are not many very rich people in Iran and I think the foreign imports will only satisfy the wealthiest 1 per cent of the population.'

But straight imports are not the only way into the market. Foreign companies are also setting up local factories under the 2002 Foreign Investment Promotion & Protection Act. Although there is no mandatory level of local ownership, investment permits will most likely go to companies establishing joint ventures with local companies. There are reports that Germany's Daimler-Chrysler is planning to set up a factory to manufacture the Mercedes-Benz C and E classes.

Iran Khodro, a wholly owned subsidiary of the government's Industrial Development & Renovation Organisation (IDRO), now controls the bulk of the local market. Its top selling car remains the Peykan, based on the old British car, the Hillman Hunter. It retails new at $8,000 and an upgraded model retails at $18,000. Khodro's newest product, the Samand, is billed as the Iranian national car but the original designs are a reworking of a model made by Malaysia's Proton. The Samand retails new at $15,000.

Iran's other main car producer, Saipa, is also owned by IDRO. Its cars are assembled locally but are based on joint ventures with foreign companies including Citroen and Renault, both of France, Japan's Nissan Motor Company and South Korea's KIA.

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