IKCO Launches More Localization Projects

EghtesadOnline: Carmaker Iran Khodro (IKCO) has launched nine localization projects to curb the company’s capital flight by at least €17.5 million annually.

News ID: ۷۸۵۰۸۸

03 December 2019

The firm’s CEO Farshad Moqimi has been quoted as saying by IKCO Press, “We have initiated nine new projects that would cut capital flight by €17.51 million.”

According to Moqimi, 31 projects are on track, which will hopefully reduce reliance on foreign suppliers and curb capital flight to the tune of €52.62 million.

He noted that several other projects are being studied, which could reduce auto industry-related imports by €163 million, Financial Tribune reported.

In October, the government-backed Iran National Innovation Fund organized a three-day gathering in Tehran during which tech firms and automakers signed several deals worth $162 million.

These deals were aimed at boosting ties between tech firms and the auto industry with the hope of reducing the key sector’s reliance on foreign suppliers.

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

Sazehgostar SAIPA, another subsidiary of the carmaker, signed 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.

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 ($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.

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.

Iran National Innovation Fund is to provide 36 tech firms active in auto industries with 710 billion rials in loans with interest rates ranging from 4-10%

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 127,000 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.