Bauermann was appointed as Iran national team coach in July but failed to secure an automatic berth to the 2016 Olympics.
"Iran’s golden generation has earned so many successes during the past years but at the moment we have to think about the new generation,” Bauermann said.
"Iran has a big potential but we have to work hard since China has turned into a giant in Asia,” the German coach added.
Under tutelage of German coach, Iran came third in the FIBA Asia Championship.
He has also led Bayer Leverkusen, Bayern Munich and Poland national basketball team.