Defense Ministry Offers High-Tech Backing to Bolster Car Production

EghtesadOnline: Iran’s Defense Ministry is sharing its technological capabilities with the automotive sector to boost production.

News ID: ۷۸۵۶۳۱

20 September 2020

Firms affiliated with the ministry showcased their capabilities in manufacturing high-tech components used in a wide range of automotive fields during a recent exhibition, ISNA reported.

At the event, the exhibitors featured over 2,000 military and non-military parts, with the latter including key components used in the automotive sector.

During a visit to the exhibition, Defense Minister General Amir Hatami said the domestic auto and auto parts producers should benefit from the high-tech solutions developed by the Defense Ministry and its subsidiaries over the years.

Hatami referred to Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei’s earlier speech urging the Cabinet to streamline the automotive sector by tapping into domestic capabilities, and said the exhibition is a starting point of an initiative in line with the Leader’s call.

“An initiative for propping up the auto sector has been jointly launched by the ministry, the private sector, knowledge-based companies and other industrial firms. The industrial units exhibiting their products at the event have the capacity to meet the demands of domestic production units and slashing their dependency on foreign supplies,” he said.

Hatami noted that the ministry is committed to support the country’s industrial sectors and does not let pressures and limitations come in their way.

“The ministry earlier played its part in strengthening the health sector in their battle against the novel coronavirus by producing health-protective items. The same will happen for the automotive industry that is facing difficulties in production,” he said.

Besides automotive parts, the non-military section of the exhibition featured high-tech parts used in petrochemical, rail, health, aviation, marine, communication and ICT fields.

Iranian car companies depend on auto parts imports, especially key electronic, for producing vehicles. Following the imposition of harsh US sanctions against Tehran since the summer of 2018, the local firms’ ties to the global supply chain were disrupted and the import of parts began to trickle.

History of Contributions

The Defense Ministry is supporting domestic automakers to curb their reliance on foreign parts.

In early June 2019, the ministry started to share its technological capabilities with local car companies Iran Khodro Company and SAIPA.

With the ministry's support, the production of homegrown substitutes for key imported car parts was placed on the agenda.

In an integrated move, the ministry signed a deal with local car manufacturing company SAIPA in December 2019 to bolster collaboration in research and development, design, technical monitoring, safety standards and localization of parts

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

According to Seyyed Javad Soleimani, CEO of SAIPA, 23% of auto parts used in SAIPA cars need to be imported.

“If the agreement with the ministry is fully implemented, localization of parts manufacturing will prevent the capital flight of $300 million per year,” he said.

Iran’s Army Steps In

Recently, the Iranian Army has also joined the Defense Ministry in backing the domestic automakers.

Two weeks ago, SAIPA signed an agreement with the Iranian Army’s Air Force, based on which the latter’s technologies will be shared with the carmaker.

Deputy Coordinator of Iran Air Force Brigadier General Mehdi Hadian and a member of SAIPA’s board of directors, Masoum Najafian, signed a collaboration deal.

According to Hadian, army’s Air Force has upgraded high-tech equipment, which can help flourish the domestic auto sector.

“The linkup can put this potential into practice and fill the gaps on both sides,” he added.

Najafian also said self-sufficiency in the production of all auto parts, especially the high-tech components, is the main challenge facing the auto sector.

“The goal is certainly achievable with the army’s support. Besides maximizing the share of domestic producers in the auto part sector, this cooperation can also be extended to launch new schemes and expand the sector’s horizons,” he added.

Productive Investments

The local media reported in late August that Iran’s Industries Ministry plans to invest 40 trillion rials ($148.14 million) in a research and development project for localizing key auto parts, Mehdi Sadeqi-Niyaraki, a deputy industries minister, said.

He added that several firms and state entities have joined forces to implement the project.

Major Iranian car companies are to spearhead the project by harnessing the potentials of local tech firms and knowledge-based companies.

The Defense Ministry and IRGC’s Aerospace Division will also contribute to the project. The ministry has lately undertaken a number of 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.

“The project envisages the production of automotive high-tech components, including turbochargers, electronic control units and special sensors, which are currently imported. After developing and testing prototypes, we will begin mass production,” Sadeqi-Niyaraki said.

He stressed that the indigenization of automotive technologies tops the agenda of Iranian state authorities.

According to the deputy industries minister, there is a huge demand for auto parts in the domestic market, as devaluation of Iran’s national currency rial has made auto parts imports economically unviable.

He emphasized that production units should be overhauled to mass-produce high-tech auto parts.

“Manufacturers should be able to offer the parts at affordable prices to car companies,” he added.

Sadeqi-Niyaraki noted that in the last Iranian year (ended March 19, 2020), over €330 million have been invested in localization of auto parts and the government and automotive companies plan to inject more funds into the project.