Iranian Tech Firm to Aid Auto Upgrade

EghtesadOnline: An Iranian knowledge-based firm has signed contracts collectively worth 8 trillion rials ($29 million) to supply catalytic converters to SAPCO and Mega Motors, major auto parts producers.

News ID: ۷۸۷۰۳۶

18 September 2021

During an event early this week, representatives of the parts makers signed the deal with Iran Delco Company, ISNA reported.

Founded in 1991 in Shamsabad Industrial Town south of Tehran, the company produces advanced catalytic converters and other key auto components.

According to Alireza Majidnia, Iran Delco's sales manager, the company's catalyst production capacity is 1.5 million per year.

“The quality of these products can compete with imported counterparts, but at a much lower price,” he said, adding that the company has the potential to significantly reduce the domestic auto sector's reliance on foreign resources.

The official stated that installing high-quality catalysts on vehicles' exhaust systems can minimize the release of hazardous emissions into the air, which will reduce air pollution and increase the technical competency of brand-new cars.

According to Majidnia, the indigenization of catalysts not only meets the manufacturers' demands, but also eliminates the need for foreign consultancy in designing new catalysts for upgraded engines, as each type of engine requires a specific form of catalyst.

A catalytic converter is an exhaust emission control device that reduces toxic gases and pollutants in exhaust gas from an internal combustion engine into less-toxic pollutants by catalyzing a redox reaction.

Converters combine oxygen with carbon monoxide and unburned hydrocarbons to produce carbon dioxide and water.

According to industry insiders, the domestic car sector's collaboration with the knowledge-based ecosystem is aimed at promoting local production and reducing reliance on foreign partners.

SAPCO’s Scheme

For the indigenization of metal and non-metal auto components, SAPCO has also designed a scheme worth €26 million to be implemented in the current fiscal year (ends March 2022).

According to the company, the scheme has been split into 20 projects that are to employ high-tech solutions offered by the local technology ecosystem.

The production of isocyanate car seat cushions, raw material for dashboards, glass and loctite paste, auto lube, engine oil, brake fluids and advanced auto cabin metal sheets has been envisaged by SAPCO.

The company also plans to produce front coil springs, copper-based bearing alloys, magnesium ingots and raw material for injection molding of automotive plastic parts.

Auto component indigenization efforts were limited to the production of airbag cover material, polycarbonate material used in front lights, cabin metal sheets and metal powders last year.

Last year’s plans totally curbed capital flight in the auto sector’s supply chain by €20 million, SAPCO announced.

The parts maker is also planning to produce vehicle frames, parts and mechanical tools for 630,000 cars produced by Iran’s automaker giant, Iran Khodro Company, in the current fiscal year (started March 21).

The effort is aimed at promoting localization by reducing auto parts imports and utilizing the domestic industrial, scientific and technological capacities.

In terms of fiscal management, SAPCO has prioritized the revision of pricing mechanism by employing fiscal frameworks and improving liquidity flow in the auto parts sector.

In addition, SAPCO is working on 131 localization projects, in collaboration with knowledge-based companies. Projects worth 1 trillion rials ($4.14 million) are expected to cut capital flight by $150 million annually.

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

SAPCO has signed 23 agreements worth 2 trillion rials ($8.3 million) with the Islamic Revolution Guards Corps’ Aerospace Division. The deals are expected to slash imports by $46 million per annum.

CBI Assistance

In a similar move, the Central Bank of Iran allocated 150 trillion rials ($545.4 million) as aid packages and loans to the auto sector in early 2021 to help bolster productivity and localization efforts.

Abdolnasser Hemmati, the former CBI chief, said that of the total sum, CBI’s Money and Credit Council, Iran’s top monetary decision-making body, has earmarked 50 trillion rials ($181.8 million) to be directly lent to automakers from bank reserves.

Hemmati announced that the rest would be 100 trillion rials ($363.3 million) worth of Murabaha bonds — an Islamic financing structure in which the seller provides the cost and profit margin of a commodity — and Gam certificates.

Mohammad Reza Najafi-Manesh, the head of Iranian Automotive Parts Manufacturers Association, told reporters that Gam certificates seem to be a workable substitute for other ways of credit-based purchases, as they are more easily encashed and transferred in the local banking system compared to regular bonds. He called on automakers to use the opportunity for a positive change.

Soheil Memarbashi, the head of Transportation Office at the Industries Ministry, said the automotive sector is in dire need of financial help.

“The credit certificates can be a sustainable source of finance and simultaneously help boost parts and vehicle production,” he added.

The official said the new type of financial instrument is aimed at helping develop other industrial sectors in the near future.