Automakers, Tech Firms Sign Deals to Curb Foreign Reliance

EghtesadOnline: Over the past week, Tehran hosted an event to connect tech firms with automakers, on the sidelines of which several deals totally worth $162 million were signed.

News ID: ۷۴۸۷۲۸

15 October 2019

The government-backed Iran National Innovation Fund has organized a three-day gathering in Tehran, which opened on Monday, IRNA reported.

During the event, SAIPA subsidiary Mega Motor signed 22 deals with local tech firms worth 6.5 trillion rials ($56.5 million).

Another subsidiary of the carmaker, Sazehgostar SAIPA, inked a deal valued at 180 billion rials ($1.6 million) with local knowledge-based firm Pars Iranian Saman for the domestic production of car lamps, Financial Tribune reported.

E-commerce firm Arsh Gostar and Electronic Industries of Iran Company signed an agreement worth 490 billion rials ($4.3 million) for producing airbags.

During the same event, major Iranian auto parts manufacturers signed a contract worth 12 trillion rials (over $100 million) with 32 local SMEs to provide some relief to the country’s auto industries hard-pressed by US sanctions.

During a meeting held in Tehran on Saturday, SAPCO, Sazehgostar and Mega Motor parts makers, affiliated to Iranian auto manufacturer SAIPA, signed a multilateral agreement with 32 small- and medium-sized enterprises.

Speaking at the meeting, Mehdi Sadeqi, an official with the Industries Ministry, said the deal envisages the indigenization of 77 imported parts.

"The effort will help Iran curb capital flight to the tune of €175 million," he added.

Sadeqi noted that in line with the agreement, SMEs will help the three parts makers localize the technology needed for making the 77 key parts.

In line with policies for boosting the localization of auto parts production, SAPCO signed a deal with Ferdowsi University of Mashhad and several SMEs based in Khorasan Razavi Province in early September.

That agreement was worth 4.2 trillion rials ($36.5 million) for localizing the production of 34 car parts.

Mansour Mansouri, director of SAPCO, told reporters at the time, "In case these parts are domestically produced, it will curb capital flight to the tune of €40 million."

In addition to industrial collaboration, the company also entered into an agreement with Ferdowsi University of Mashhad to exchange automotive know-how between graduates and experts.

Visiting tech centers and research institutes of the university, Mansouri emphasized that innovative and smart solutions developed by young talented teams can help boost the automotive industry.

Support for Tech Firms

Siavash Malekifar, a deputy director at INIF, said the fund will provide 36 tech firms active in the field of auto industries with 710 billion rials in loans with interest rates ranging from 4-10%.

INIF, Iran Khodro (IKCO) and two research centers, namely Fater Group and Karimeh Research and Technology Fund, have forged a four-way agreement.

As per the agreement, the four entities are to jointly invest in tech companies active in auto industries, while providing them with legal and business counseling services.

IKCO will select knowledge-based firms capable of meeting its technological needs, while INIF will provide these companies with financial aid and cheap loans.

Economic Headwinds

The event will showcase the government's efforts to support knowledge-based companies, help reduce the country's dependency on imports and promote localization of industries.

Following the reimposition of US sanctions last summer, the Iranian rial lost almost 70% of its value over the past year. On Monday, the US dollar was traded at 115,000 rials in Tehran while it hardly fetched 42,000 rials in March 2018.

In addition, many foreign suppliers of parts suspended collaboration with Iranian firms. Iran could no longer afford to import vehicles and parts in large volumes. As a result, local manufacturers faced a shortage of parts and failed to sustain domestic auto production.

To preserve the currency reserves and cut the country's reliance on foreign companies, the government started to limit imports and pave the way for local manufacturers.

Of course, the success or failure of these strategies will only become apparent in the future.