SAIC Ponders Iran as Middle East Hub

EghtesadOnline: On the sidelines of the Shanghai Motor Show on April 21, the director of MG Pars, Lin Yong, told a press conference he expects Iran to become a regional hub for the production of SAIC’s MG vehicles and that 30% of the cars would be shipped to the neighboring countries.

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23 April 2017

MG Pars is a three-year-old venture between SAIC’s MG brand and Iran Khodro’s subsidiary in the Republic of Azerbaijan, AZVICO, which will start producing the MG360 sedan in the third quarter of this year.

SAIC is one of the ‘big four’ Chinese automakers and made 5 million vehicles in 2016 in China. The Chinese firm’s predecessor bought the British MG Rover brand from Phoenix Venture Capital group in 2005.

It was reported earlier that the two companies invested $20 million each in the JV and direct investment will increase to $400 million, according to the website Donyaye Khodro.

According to Financial Tribune, Lin confirmed that “according to the agreement 50% of the capital investment in the project belongs to the SAIC”, with the other half owned by the IKCO subsidiary.

The price of the first model to be built by the company, the MG360, is estimated to be about 700 million rials ($18,500). This is while the car that is made in China sells for $12,800 in the UAE. All foreign made cars are much more expensive in Iran than in the regional countries due to the higher tariffs and customs charges.

He added that MG Pars has plans to target a 5% share of the Iranian market with the MG Pars looking to make an initial 50,000 units in the first year. This figure is up from the 10,000 units initially reported.

The company announced on April 18 that it had made a test run of 80 MG360s.

“We have time to fine-tune our market offering and will think how we can maximize our impact,” the Chinese director was quoted as saying.

On sharing of knowhow and expertise, he noted that due to lack of investment in the Iranian market for several years due to the sanctions, much of the infrastructure for modern manufacturing is just not there.

“We intend to ship much of our manufacturing equipment to Iran to meet our production needs.”

Localization

About training local car engineers and car assemblers, Lin said, “Of course, one of the key aspects of our JV is that we share know-how [with the local partner].”

The firm will begin with a 20% localization of auto parts (including paint and tires) and then raise it to 50% in two years.

Asked if the cars assembled in Iran are meet the driving conditions in the country, he said, “We are altering the car for the Iranian market. The MG360  has been designed to suit Iran market needs.”

He also indicated that other models, although not yet officially announced, are also going through rigorous tests to meet the needs of the local market.”

He pointed to the next vehicle the company looks to introduce as an MG SUV, which is also being readied for sale. It is not known if it will be the GS or ZS SUV models.

After-Sales Service

Lin went on to say that although the company has been represented in recent years by a local company Media Motors, its customer satisfaction rating was low.

With the new venture and SAIC’s control over the project, the firm hopes to have service centers readied for customers and to create a breakdown recovery service.

Electric Vehicle Potential

During the Tehran Auto Show in late February, MG Pars showed several vehicles it intends to either ship or produce in the country. One that was not mentioned in Lin’s meeting with the press was the Roewe-MG E50 electric car.

It is a fully electric vehicle and will be exempt from 91% of the average import tax if it were to enter the market.