Iraq New Vehicle and used Vehicle Market Outlook to 2028

Iraq New Vehicle and Used Vehicle Market Overview

• The Iraq New Vehicle and Used Vehicle Market is valued at USD 10 billion, based on a five-year historical analysis. This growth is primarily driven by increasing urbanization, rising disposable incomes, a rebound in demand following the pandemic, and a growing need for both personal and commercial transportation. The market has seen a significant influx of both new and used vehicles, with online marketplaces such as iQ Cars facilitating access and transparency for a diverse range of consumer preferences and needs.
• Key cities dominating the market include Baghdad, Basra, and Erbil. Baghdad, as the capital, serves as a central hub for trade and commerce, resulting in increased vehicle demand. Basra's strategic location as a port city enhances its logistics and transportation needs, while Erbil's economic growth and development projects contribute to its rising vehicle market.
• In 2023, the Iraqi government issued Cabinet Resolution No. 23055, which provides tax exemptions and customs duty reductions for electric vehicles (EVs) and hybrid vehicles. This regulation, issued by the Council of Ministers, aims to promote the adoption of EVs, reduce carbon emissions, and encourage sustainable transportation solutions in Iraq. The incentives include reduced import duties for EVs and support for charging infrastructure development.

Iraq New Vehicle and Used Vehicle Market Segmentation

By Type: The market is segmented into various types, including Used Passenger, New Passenger, Used Commercial, and New Commercial Vehicles. Each category caters to different consumer needs, with Used passenger vehicles dominating due to Iraq’s young demographics and preference for affordable mobility, and with new passenger vehicles driven by modern designs, financing availability, and after-sales service; new commercial vehicles supported by logistics and infrastructure activity; Used commercial vehicles serving small businesses and transport operators seeking cost-effective fleet options.

By Fuel Type: The fuel type segmentation includes Gasoline, Diesel, and Electric/Hybrid Vehicles. Gasoline vehicles dominate the market, supported by their affordability, wide availability, and strong refueling infrastructure. Diesel vehicles also contribute significantly, with demand driven by logistics, commercial fleets, and sectors requiring higher fuel efficiency and torque. Electric and hybrid vehicles, while currently holding a smaller share, are expanding rapidly as rising fuel costs, government incentives, and growing environmental awareness encourage adoption among consumers and businesses alike.

Iraq New Vehicle and Used Vehicle Market Competitive Landscape

A dynamic mix of regional and international players characterizes the Iraq New Vehicle and Used Vehicle Market. Leading participants, such as Toyota, Kia, Hyundai, MG,  and Suzuki, contribute to innovation, geographic expansion, and service delivery in this space.

Iraq New Vehicle and Used Vehicle Market Industry Analysis

Growth Drivers

• Government Push for Local Assembly and Industrial Revival: Iraq’s Ministry of Industry is actively promoting local vehicle manufacturing through CKD/SKD incentives, particularly in Basra and Baghdad industrial zones. This initiative is part of the National Development Plan 2023–2027, which seeks to reduce import dependency and create over 20,000 direct jobs. The government’s strategy positions automotive manufacturing as a key pillar of Iraq’s industrial diversification and economic development agenda.
• Youth-Driven Demand and Urbanization Growth: With over 60% of the population under 25, Iraq is witnessing a surge in first-time car ownership, especially in urban hubs like Baghdad, Erbil, and Basra. Rising urbanization, expected to reach 73% by 2030, along with improving road infrastructure and increasing disposable incomes, is fueling demand for two-wheelers and four-wheelers. This demographic and urban shift is creating a large, youthful consumer base for both new and used vehicles.
• Emerging Investment and Regional Expansion Activity: Iraq is attracting foreign direct investment (FDI) in mobility, from luxury car dealerships like Rolls-Royce in Erbil to tech-enabled platforms such as iQ Cars. Simultaneously, new automotive players are leveraging Iraq’s strategic location as a re-export hub to Turkey and the Levant. These trends signal growing investor confidence, with regional expansions and consolidation activities supporting long-term growth in Iraq’s automotive ecosystem.

Market Challenges

• Regulatory Inconsistencies and Policy Gaps: Iraq’s alignment with GCC import regulations is hindered by inconsistent application of customs exemptions and varied licensing norms across provinces. This regulatory fragmentation creates uncertainty for dealers and importers, complicating vehicle movement and market planning. Additionally, the lack of a finalized EV subsidy or tax benefit framework delays the rollout of electric vehicles. Compared to neighboring countries that offer duty waivers, Iraq’s policy gaps place it at a competitive disadvantage for OEM entry and EV adoption.
• Informal Distribution Channels Limit Market Formalization: A significant portion of vehicle parts and used car transactions in Iraq continues to flow through informal or unregistered distributors. These fragmented channels contribute to inconsistent product quality and weak traceability, hampering the development of a robust after-sales ecosystem. While regional markets have made strides in formalizing B2B distribution platforms, Iraq’s penetration remains limited, restricting the growth of organized sales networks and diminishing consumer confidence in used vehicle purchases.

Iraq New Vehicle and Used Vehicle Market Future Outlook

The future of Iraq's new and used vehicle market appears promising, driven by urbanization and rising incomes. As infrastructure investments continue, the demand for vehicles is expected to grow, particularly in urban areas. Additionally, the shift towards electric vehicles and online sales platforms will likely reshape the market landscape. With increasing disposable income and a burgeoning middle class, the market is poised for expansion, despite challenges such as political instability and financing limitations that need addressing.

Market Opportunities

• Acceleration of Digital Used-Car Platforms in Urban Iraq: Online vehicle platforms like OpenSooq, CarsDir, and IQ Cars now account for ~20% of used car transactions in Iraq, with usage doubling since 2019. Increased mobile internet penetration and urban digital adoption are driving this trend. Automotive players can capitalize by integrating with these platforms and supporting VIN-based inspection tools that improve transparency and consumer trust in online vehicle sales.
• EV Charging Network Expansion and Policy Momentum: Iraq plans to install 500 public EV charging stations by 2029, with a near-term target of 50 stations by 2026 in key cities like Baghdad and Basra. Backed by the Electricity Master Plan, this infrastructure rollout is supported by private partners like Zain Iraq. The initiative paves the way for early EV adoption, presenting growth potential for electric vehicle manufacturers and charging solution providers.