Over a million Iranians have deposited approximately $3,800 each in banks, hoping to "win" one of the vehicles that Iran's leading automaker, Iran Khodro, raffled off last week pending the announcement of the results.

The annual draw is being held for a total of 120,000 vehicles of different types but making a deposit was required for 36,000 of them.

Many Iranians buy cars as investments like gold, real estate, stocks, and foreign currency to maintain the value of their savings. Prices, even for used cars, can increase in tandem with high inflation and a falling currency.

In the past few years, Iran's automakers have not been able to meet their production targets because of US sanctions imposed in 2018 and foreign currency shortages that hugely affected the procurement of parts. In the same year, imports were also banned. This has led to an imbalance in supply and demand. Iran was the 19th car producer in the world in 2021.

Out of the over 2.2 million people who signed up for the draw, only 1.2 million were required to make the deposit. As a result, their chances of winning in the deposit-required category are extremely low.

The draw has locked the total of around $4.5 billion in Iranian banks, equivalent to the total stock market value of the country’s top three automakers, Iran Khodro, Saipa, and Pars Khodro.

Iran Khodro and Saipa account for over 90 percent of all car production in the country. The government owns 40 percent of the shares in both companies "privatized" a few years ago and has maintained control over them. In fact, most of the other shares are also owned by government-affiliated banks and companies.

Some banks have offered applicants interest-free, no-fee loans of one billion rials ($1,600) without requiring guarantees, enabling them to cover part of the 2.3 billion rials ($3,800) deposit needed to participate in the draw. Notably, banks such as Sarmayeh and Iran Zamin, which have offered these loans, are among those that have faced significant capital losses in recent years.

The deposited sum covers half the final cost of the cars, and the outstanding amount should be paid at delivery time. Those who do not win in the draw have been promised to get back their deposits after the draw.

The vehicles sold to the fortunate "winners" are expected to be significantly more valuable on the open market when delivered over the next seven months—assuming the automaker adheres to its schedule without any delays.

Only a fraction of the 1.2 million applicants who made the deposit actually need the vehicles for personal use. The prospect of profiting from reselling the cars at higher prices on the open market has motivated many to sign up for multiple vehicles under the names of eligible family members. This strategy is driven by the expectation of a substantial profit once the vehicles are delivered.

“Probably over 90 percent of those who signed up are people who have money that they cannot use in business,” Babak Sadraei, an automotive industry expert, told Entekhab news website, adding that the automaker and the banking system are “the real winners” in the process.

Sadraei also cautioned about the potential economic impact of releasing a large amount of liquidity into the market when the locked deposits are freed. He warned that this influx of cash could flow into other sectors, such as the foreign currency market, driving up prices and further destabilizing the economy.

The online registration for the draw ended last month. Iran Khodro's latest statement said the draw was scheduled for late August but the results will be announced early September. The automaker has yet to announce a timetable for the gradual delivery of the vehicles.

Of the remaining 84,000 vehicles in the draw for grabbing, 60,000 are allocated to mothers with two children one of whom was born in the past two years. This is part of a government initiative to encourage population growth while 24,000 are the share of those whose cars are now too old and need to be scrapped.

Applicants in these two groups were not required to deposit money for the banks.