Tech Support for Auto Localization

EghtesadOnline: The procurement of raw materials and key components in Iran’s auto parts manufacturing sector has been beleaguered by US sanctions, but the domestic technology ecosystem stepped in to help overcome the limitations.

News ID: ۷۸۷۳۱۹

21 November 2021

The newest achievement pertains to an Iranian knowledge-based firm that has indigenized over 10 raw materials for the production of automotive parts since the beginning of the current Iranian year (March 2021).

The accomplishment of Mehr Cam Pars Company, a manufacturer of auto body parts for the major automaker Iran Khodro Company (IKCO), came in the wake of collaboration with tech teams from Tehran’s Amirkabir University of Technology and Isfahan University of Technology, Ikcopress.ir reported.

Morteza Mohammadi, MCPC’s CEO, told reporters that his company has achieved over 90% self-sufficiency in polymer parts production.

He noted that the company is working on the technology for the indigenization of other polymer materials, such as acrylonitrile butadiene styrene (ABS), expanded polypropylene (EPP) and polybutylene terephthalate (PBT), to help eliminate imports.

Mohammadi said the company has so far localized over 70 types of raw materials and parts, which helps save foreign exchange and surmount any logistical challenge.

Launched in 1990 in Tehran, MCPC is a design and engineering company for auto trim and polymer parts. It joined automotive manufacturing industry with the production of Peugeot 405 bumper for IKCO.

The company now produces dashboards, door panels, HVAC systems and seats for several IKCO sedans.

Delco, another Iranian knowledge-based company, earlier signed a contract collectively worth 8 trillion rials ($28.5 million) to supply catalytic converters to SAPCO and Mega Motors, major auto parts producers.

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 the installation of 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.

Industries Ministry’s Efforts

Localization efforts in the domestic auto sector have gained momentum.

In late October, the Ministry of Industries, Mining and Trade launched the fifth round of auto parts localization scheme, which is expected to reduce imports by €56 million annually.

According to the initiative, the ministry financed 22 collaboration deals between domestic automakers and parts manufacturers.

Deputy Industries Minister Mehdi Sadeqi Niyaraki said the domestic auto sector should be restructured and modified.

"When a sector begins to lose money, it cannot be expected to be deeply indigenized, competitive, or investible," he added.

He stated that nine projects have been designed to achieve this structural modification, including the revision of auto pricing, the redrafting of company management and ownership, and the reactivation and expansion of commercial vehicle production lines.

Niyaraki noted that simply designing an ambitious project is not workable without strong will and action, pointing to the fact that similar plans have repeatedly been designed to streamline the sector over the years.

"We hope that these serial indigenization contracts will converge with the empathy of the sector's authorities and deliver positive, long-term results," he added.

According to the official, the deeper the localization efforts, the larger the investments required to continue.

“As more complex auto components are targeted, their production will necessitate upgraded technologies and expertise," Niyaraki said.

In the summer of 2019, the Industries Ministry launched its localization initiative to ensure the domestic auto sector's self-sufficiency. According to the ministry, the previous four rounds of auto parts localization are expected to save €343 million in annual imports.

The first round of the scheme has advanced by 82% while the following three rounds have notched 65%, 57% and 54.5% progress, respectively.

Officials from the ministry and auto industry insiders are optimistic that such localization endeavors, combined with the contributions of other entities, will increase domestic auto output and mitigate the negative effects of US sanctions against Iran, which have limited the country's commercial relations with foreign partners.