Iranian Carmakers’ Double-Pronged Strategy for Boosting Production

EghtesadOnline: Iranian carmakers have implemented a double-pronged strategy to curb their reliance on foreign suppliers: expanding ties with local tech firms and academia, as well as collaborating with armed forces.

News ID: ۷۵۱۶۸۲

10 December 2020

Following the reimposition of harsh US sanctions against Tehran in 2018, most international automotive companies cut their ties with Iran. The sudden move took a harsh toll on local car production.

To curb the industry’s over-reliance on imports, Iranian car companies tapped domestic capabilities. The decision has been praised by Islamic Republic officials and is in line with policies outlined by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.

Armed Forces

Major automaker SAIPA initiated collaboration with armed forces to implement 81 projects for localizing high-tech auto parts, hoping to curb the sector’s dependency on foreign suppliers.

The projects have been established in collaboration with the Defense Ministry, Aerospace Force of the Islamic Revolution Guards Corps and the Iranian Army’s Air Force, the automaker’s website Saipanews.com reported.

According to Daryoush Golmohammadi, SAIPA’s deputy for strategic planning, 28 joint ventures are being implemented with industrial units affiliated with Defense Ministry.

“So far, seven high-tech electronic car components have been localized and are ready for mass production,” he said.

Golmohammadi noted that SAIPA is producing 26 advanced parts with the help of IRGC’s Aerospace Force.

“These parts are undergoing trials and will enter the production line, as soon as the prototypes give rise to positive results,” he said.

The army’s Air Force is also cooperating with the automaker in 27 other localization projects, which Golmohammadi said are in the design phase. The targeted auto parts, which used to be imported, include Engine Control Unit, modulator, injector, airbag, multimedia system, DC engines, electric sensors and digital ammeter.

“With the local production of these components, SAIPA can curb capital flight by up to €94 million annually,” the official said.

The automaker is also negotiating with the Defense Ministry for the joint production of GPS and radar systems for electric vehicles.

Tech Firms

SAIPA is strengthening cooperation with the University of Science and Technology to upgrade its products with the state-of-the-art technology.

SAIPA CEO Javad Soleimani and Mohammad Hossein Shojaeifard, the dean of the university’s research faculty, signed a deal on expansion of collaborations in June.

The deal calls for establishing a specialized taskforce to design joint projects, absorb university graduates in the industrial unit as technical and scientific advisors, conduct research using university facilities and strengthen the role of academic center in SAIPA’s new projects.

Soleimani said SAIPA intends to seek the help of university graduates, professionals and tech units born in the academic center to systematically transfer new technologies and know-how to the automotive production lines.

The efforts have not been limited to the academia. 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, 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.

Surge in Output

Iran’s automotive output increased by 16.3% during the eight months to Nov. 20 compared with the year-ago period.

According to data released by Securities and Exchange Organization on Codal.ir, Iran’s major automakers, namely Iran Khodro (IKCO), SAIPA and Pars Khodro, produced 566,844 sedans during the eight months.

IKCO’s output during the period rose to 291,234, which is 43.6% higher year-on-year when the company produced 202,695 passenger vehicles. Several Peugeot and Dena models formed a huge share of the company’s production rate.

In addition, IKCO manufactures commercial vehicles, such as pickups, vans, trucks and buses, the stats of which have not been announced.

SAIPA produced 209,534 vehicles in the eight months, marking a 19.2% year-on-year decline by producing 259,362 vehicles. Tiba models were the best-selling vehicles on SAIPA’s production list.

Pars Khodro, a subsidiary of SAIPA, registered a 7% increase by producing 66,076 vehicles during the period under review compared to 61,717 cars year-on-year.

Monthly comparisons, however, show that the total production rate of the three companies increased. During the eighth month (Oct. 22-Nov. 20), auto output reached 69,968 to mark a 1.3% rise compared to the previous month.

IKCO’s production rate hit 40,901 during the eighth month, marking a 5.7% rise compared to the previous month. SAIPA’s output reached 21,263, marking a decline of 1.3% month-on-month.

Pars Khodro last month produced 7,801 cars, registering an 11.5% fall compared to the previous month.

Mismanagement and the pressure of US sanctions, now coupled with the Covid-19 outbreak, have derailed Iran’s auto industries.

Industry insiders have speculated that the two companies perpetually remain on the verge of bankruptcy and constantly beseech the government to help bail them out on the pretext of saving thousands of jobs at risk in the chronically dysfunctional automotive companies.