Iranian Auto Parts Makers, SMEs Sign $100m Deal

EghtesadOnline: Major Iranian auto parts manufacturers have recently signed a contract worth 12 trillion rials (over $100 million) with 32 local SMEs as part of a push to provide some relief to the country’s auto industries that have been hard-pressed by US sanctions.

News ID: ۷۸۴۹۳۰

08 October 2019

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

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

"The effort will help Iran curb capital flight to the tune of €175 million," Financial Tribune quoted him as saying.

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

In line with policies on strengthening 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) and aimed at localizing the production of 34 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 technical know-how between graduates and experts in the field.

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.

Importance of Tech Firms

Over the past few years, Iranian authorities have emphasized the positive role of knowledge-based firms and startups in different fields.

In line with this policy, Iran National Innovation Fund is hosting a three-day gathering in Tehran to connect such firms with automakers, which opened on Monday.

The event will highlight challenges facing Iranian auto and parts manufacturers and encourage knowledge-based companies and startups to devise smart solutions to help resolve the industry’s problems.

Besides the two major automakers Iran Khodro and SAIPA, over 300 tech firms and startups, along with the representatives of Vice Presidential Office for Science and Technology and INIF officials, are participating in the gathering.

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 shortage of parts and failed to keep the domestic auto production going.

To preserve national 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 future.