Upswing in Iran Auto Output

EghtesadOnline: Iran’s automotive output increased by 9.75% during the first four months of the current Iranian year (March 21-July 22) compared with the year-ago period.

News ID: ۷۸۶۷۷۵

01 August 2021

According to data released by Securities and Exchange Organization on Codal.ir, Iran Khodro (IKCO), SAIPA and Pars Khodro, Iran’s three major automakers produced 289,228 sedans during the period, which figure was 263,525 last year.

IKCO’s output during the period rose to 145,045, which is 9.6% higher than last year’s corresponding time when the company produced 132,324 passenger vehicles.

SAIPA, IKCO’s competitor, produced 109,175 vehicles in the four months, marking a 7.3% year-on-year decline.

A subsidiary of SAIPA, Pars Khodro, however, registered a significant 161.3% growth by producing 35,008 cars during the period.

Monthly comparisons show that the total production rate increased by a meager 1.92% with 85,699 units.

During the last month (June 22-July 22), IKCO’s production rate hit 47,815, marking a 33.4% growth compared to the year-ago month.

SAIPA’s output in the month was 27,506 vehicles, 28% lower than the same period of last year.

Pars Khodro last month produced 10,378 cars, registering a 4.1% growth compared to the year-ago month.

The pressure of US sanctions and mismanagement, coupled with the Covid-19 outbreak, have derailed Iran’s auto industries. However, the government has stepped in to streamline the sector and cut its reliance on foreign resources.

Industry insiders have optimistically set the current year’s auto production target at 1.25 million sedans.

In the last fiscal year (ended March 20, 2021), IKCO and SAIPA forged ties with knowledge-based teams to indigenize auto electronic parts in the hope of improving the quality and quantity of their output. Officials are optimistic that automakers will meet the goal this year.

Cost Reduction Initiatives

According to Farshad Moqimi, CEO of IKCO, the localization of vehicle parts has saved up to $210 million for IKCO in the last two fiscal years (March 2019-21).

He said the achievement mainly resulted from the localization of 135 auto parts and vehicle design projects implemented with the help of SAPCO during the period.

“The projects have gradually curbed IKCO’s dependency on foreign suppliers,” he added.

According to the IKCO chief, the company has produced 2,000 sets of vehicle frames and mechanical tools, saving up to $22 million with the support of industrial units affiliated with the Defense Ministry and knowledge-based companies.

“The company used to spend close to $360 million on the import of parts every year. Fortunately, indigenization efforts can raise the amount of saving to $248 million per year,” he added.

Moqimi noted that an additional 125 indigenization projects are underway in various fields, which are expected to annually reduce capital flight by €133 million.

“The ventures would save up to €76 million in auto parts and €26 million in raw materials. Optimization of car manufacturing process will also save €24 million and the localization of molds and auto mechanic equipment will help conserve an additional €7 million,” he said.

The IKCO chief noted that localization projects require an investment of €13 million, adding that IKCO intends to raise a portion of the funds by selling unproductive properties and assets, procure bank loans and attract private sector investment.

“The imported component used in the production of each vehicle is €1,715, of which 67% are spent on importing raw materials and electronic components,” he said.

“The remaining 33% are spent on parts and vehicle frames, which can be reduced in cooperation with other industries, such as petrochemical and steel manufacturing sectors.”

Moqimi urged local producers and industrial units to make their best efforts in implementing projects that advance the auto sector’s self-sufficiency.

In line with the automaker’s indigenization objectives, SAPCO, Iran’s largest auto part manufacturer, is planning to produce vehicle frames, parts and mechanical tool sets for 630,000 IKCO cars in the current Iranian year (started March 21).

The plan is aimed at promoting localization and reducing auto part imports by utilizing the domestic industrial and technological capacities.

In addition, SAPCO is working on 131 localization projects in collaboration with knowledge-based companies. Projects worth 1 trillion rials ($4 million) are expected to save $150 million annually.

The parts maker also has 21 joint projects with the Defense Ministry, which are projected to save up to €33 million per year.

SAPCO has signed 23 collaboration agreements worth 2 trillion rials ($8 million) with the Islamic Revolution Guards Corps’ Aerospace Division. The deals are expected to slash imports by $46 million per annum.

SAIPA’s Indigenization Measures

In late November 2020, SAIPA announced that it is implementing 81 projects to indigenize high-tech auto parts for curbing the sector’s dependency on foreign resources.

Based on the automaker’s website Saipanews.com, the projects have been designed in collaboration with the Defense Ministry, IRGC’s Aerospace Division and the Iranian Army’s Air Force.

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

“Seven sophisticated electronic car components have been localized and are ready for mass production,” he said.

Golmohammadi noted that SAIPA is producing 26 high-tech parts with the help of the Aerospace Division.

“These items are undergoing trials and their production will begin, as soon as the prototypes are tested and verified,” he said.

The army’s Air Force is also cooperating with the automaker in 27 localization projects, which the official 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 domestic production of these components, SAIPA can curb capital flight worth €94 million annually,” Golmohammadi said.

SAIPA is also negotiating with the ministry for the joint production of GPS and radar systems for electric vehicles.