As Iraq embarks upon serious post-war reconstruction efforts amidst political turmoil, the country’s automotive sector has been identified as a key target area for growth and reform. Iraq’s automotive sector has suffered considerably from years of protectionist government policies, sanctions and war. The country’s industrial sector, once one of the most robust in the Middle East, has deteriorated significantly due to conflict in the region, with many Iraqi factories taken offline in response to the 2014 Islamic State (IS) invasion. Despite this, recent government moves to stimulate activity within the automotive sector have resulted in rising levels of foreign investment, indicating a potential rebound for the industry following over two decades of heavy losses due to domestic conflict and mismanagement of the sector.
Iraq’s automotive sector remains extremely underdeveloped due to decades of war and political turmoil. Recent estimates put car ownership at just 5%, meaning only 1 in 20 Iraqis own a vehicle. Due to the banning of Western imports under Baathist rule, beginning in 1983, the market was flooded with VW Passats shipped from Brazil in exchange for oil. Under Saddam Hussein, auto ownership was restricted, with all auto purchases administered by Iraq’s state-owned car company, the State Company for Automotive Industry (SCAI). While the government made repeated efforts to produce and assemble an Iraqi-designed car during this time, the project never came to fruition due to a lack of technical know-how.