Local Tech Firms Fill Automotive Void Created by Foreign Partners

EghtesadOnine: Following the reimposition of US sanctions in 2018, almost all foreign automotive partners pulled out of Iran. However, local technology companies gradually stepped in to fill the void.

News ID: ۷۵۱۶۴۷

06 December 2020

Most recently, a knowledge-based company produced several high-tech auto parts that meet global standards, which has been hailed by industry insiders as a step toward localization of auto parts.

According to the Vice Presidential Office for Science and Technology, Iran Spare Parts Company, a major manufacturer of auto components, recently announced it has produced crankshaft pulley, rubber bush, plastic bush, engine handle, hydro mount and balance shaft using state-of-the-art technologies, the office’s website Isti.ir reported.

The components used in the production of several car models are in high demand.

Reza Aryana, the CEO of ISPC, said the parts have a coating that makes them resistant to rust and corrosion.

Noting that various engineering methods are employed to designing these parts, Aryana said, “ISPC’s production is supervised by professionals and quality control units to enforce the latest global standards and meet the requirements of domestic automakers.”

He further said the company’s products are compatible with foreign samples, adding that the mass production of tech-based auto parts can curb the sector’s dependency on foreign resources and prevent capital flight.

Car Production Boost

State-backed automotive tech localization efforts and the strong role of knowledge-based and technology firms in the past several months have boosted the production rate of domestic automakers, especially Iran Khodro Company (IKCO).

The boost is evident in the company’s 43.6% rise in output recorded in the eight months to Nov. 20 compared to the year-ago period.

According to data released by Securities and Exchange Organization on Codal.ir, IKCO produced 291,234 sedans during the eight months, which show an increase of 89,000 compared with last year’s corresponding figure.

Industry insiders believe that this could not be achieved in the absence of government support and the tech ecosystem.

Late August, the Industries Ministry said it is planning to invest 40 trillion rials ($152.38 million) in a research and development project for localizing key auto parts.

Mehdi Sadeqi-Niyaraki, a deputy industries minister, said several firms and state entities have joined forces to implement the project.

Major Iranian car companies are to spearhead the project by tapping into the potentials of local tech firms and knowledge-based companies, he added.

The Defense Ministry and the Islamic Revolution Guards Corps’ Aerospace Division will also contribute to the project. The ministry has lately launched projects to indigenize auto parts production and IRGC’s aerospace arm has become active in the field of automotive engineering and R&D over the past few years.

Besides, the Defense Ministry also started supporting domestic automakers to curb their reliance on foreign parts.

In June 2019, the ministry began to share its technological capabilities with local car companies. Since then, the production of homegrown substitutes for key imported car parts was placed high on the agenda.

The ministry helped produce domestic substitutes for 35 key auto parts in Iran to curb the industry’s reliance on the global supply chain.

Recently, the Iranian Army also joined the Defense Ministry in backing similar endeavors of domestic automakers.

Deputy Coordinator of Iran Air Force Brigadier General Mehdi Hadian told reporters that the army’s Air Force possesses high-tech equipment to support the domestic auto sector.

“The linkup can help mobilize this potential and fill the gaps on both sides,” he said.

In the face of economic constraints created by the US sanctions in 2018, the auto sector focused on self-sufficiency in the production of auto parts, especially high-tech components.

These efforts have resulted in slashing imports of auto parts and saving foreign currencies.

Money-Saving Moves

In early October, IKCO announced that it has curbed capital flight to the tune of €137 million through the localization of 54 auto parts in the first six months of the current Iranian year (March 20-Sept. 21), a senior company official said.

Hamid Moradi, IKCO’s deputy executive manager, noted that this has been accomplished, thanks to the support of industrial units affiliated to the Defense Ministry and knowledge-based companies.

“This is part of efforts to gradually slash the capital flight caused by auto parts imports, which can reach €248 million annually,” he added.

The official noted that the implementation of projects will save €13 million for the company in the second half of the current year, reducing IKCO’s annual capital flight down to €150 million this year, which used to exceed €300 million.

Moradi announced that with more than 10,500 technicians and professionals, Iran Khodro is taking strong steps for “boosting production”, the strategy put forward by Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei, as a solution for overcoming headwinds faced by all economic and industrial sectors.

According to insiders, the Iranian auto industry can reduce capital flight by $2 billion, if the government increases localization efforts.