Iranian auto parts manufacturer SAPCO has signed multiple agreements with domestic knowledge-based companies, as part of efforts for curbing reliance on foreign resources.
Late last week, the major supplier for the two giant automakers Iran Khodro (IKCO) and SAIPA, SAPCO signed 80 agreements with tech firms in a wide range of fields, including the production of electronic stability control system, hydraulic wheel for IKCO's Peugeot 206 model and refrigerant gas used in vehicles' chiller system, IKCO's website reported.
Farshad Moqimi, CEO of IKCO, said SAPCO signed the agreements with knowledge-based companies during a tech event held in Tehran.
"During the tech event, IKCO introduced 219 technological needs of its production line and invited tech units to offer smart solutions," he added.
Pointing to the fact that the domestic auto production sector’s ties with technology ecosystem help automakers promote innovation and upgrade the industry, Moqimi called on the Vice Presidential Office for Science and Technology to continue support for knowledge-based companies and help promote the country’s economy.
The signing ceremony was attended by Vice President for Science and Technology Sorena Sattari and SAPCO and IKCO officials, as well as directors of tech firms.
Earlier Efforts
Over the past few months, IKCO has highlighted the need to upgrade auto production by utilizing domestic potentials.
The Defense Ministry has lately been helping the local auto sector to bolster its productivity and curb reliance on foreign auto parts suppliers.
In early June 2019, the ministry started to share its technological capabilities with local car companies. As per the move, with the ministry's support, homegrown substitutes for key imported car parts were supposed to be produced in Iran to curb the industry’s reliance on the global supply chain.
At present, IKCO has contracts with several ministry-affiliated firms and nine knowledge-based companies in 29 auto production projects.
Moqimi said the collaborations have so far resulted in the localization of 51 key auto parts, preventing the capital flight of up to €127 million per year, which figure will further increase when the new agreements come on stream.
Following the reimposition of harsh US sanctions, Iranian carmakers faced an uphill battle to sustain operations.
In December 2019, Moqimi said the company was to utilize the technical and engineering expertise of eight industrial companies affiliated to the Defense Ministry.
“The projects will become operational, as soon as the agreement's terms and conditions are finalized,” he said at the time.
The initiative to increase the share of domestic auto parts production was first launched by the Industries Ministry that also applauded similar moves by other carmakers.
The IKCO chief noted that the company has also signed several agreements with domestic small- and medium-sized enterprises since the beginning of the current Iranian year (March 2019) to mass produce 32 other auto parts, which are expected to save up to €16.7 million annually.
Moqimi expressed hope that the efforts will yield sustainable benefits for the domestic auto industry.
Sanctions' Effect
Following the reimposition of US sanctions against Tehran last summer, ties between Iranian car companies and international auto parts suppliers were disrupted.
Almost all partners of local carmakers suspended their Iran operations. Some of the automotive firms that withdrew from the Iranian market are Renault, Peugeot, Citroen, Volvo, Daimler and Hyundai.
With sanctions taking a toll on Iran’s international banking relations, local car companies can hardly purchase parts from smaller market players and intermediaries.
All these have led to a sharp fall in car output. Iran’s automotive production rate fell by around one-fifth during the ninth months ending Dec. 21, 2019, compared to a year earlier, according to data published by the local media.
Shrinking Output
The latest data of Iranian automotive companies show their output plummeted to new lows in the first month of the current Iranian year (started March 21, 2019). As a result, unofficial automotive data have been compiled from Tehran Stock Exchange transactions.
The Industries Ministry’s data indicate that Iran produced 40,602 cars and 2,021 commercial vehicles in the month, registering a 47.2% decline compared with a combined output of 80,794 units in the corresponding month of the year before.
According to a January report published by Fars News Agency, Iran’s automotive output fell by 24.8% during the ninth months ending Dec. 21, 2019, compared to a year earlier.
The number of passenger vehicles produced during the period was 524,167, 26.3% lower than the year-ago time.
Besides, the production of passenger vans, minibuses, buses and commercial vehicles also declined by 86.2%, 54.6%, 28.4% and 73.7% respectively.
Industry insiders and local media outlets have speculated that the two major Iranian automakers are on the verge of bankruptcy and, as usual, need the government to help bail out the chronically dysfunctional automotive companies on the pretext of saving thousands of jobs at risk.
