Iran’s major automaker Iran Khodro (IKCO) is starting cooperation with the Electronics Support Fund for Research and Development to upgrade its production facilities.
Affiliated to the Ministry of Industries, Mining and Trade, the fund is geared toward connecting knowledge-based companies with big industrial units, helping both to develop their businesses.
To achieve this aim, IKCO’s CEO Farshad Moqimi and Reza Naqipour, the head of ESFRD, met on Friday and discussed the potential areas of collaboration and outlines of an agreement, Shata News reported.
Naqipour said numerous knowledge-based companies are active in auto manufacturing industries.
“If supported, these small- and medium-sized enterprises can be of a great help to IKCO in upgrading the quality and design of vehicles,” he added.
Naqipour noted that fortunately, the technology ecosystem has a satisfactory status in terms of professional workforce and technical knowledge.
“As a large number of tech units were engendered in universities, ESFRD will further strengthen ties between the academic and industrial sector.
Appreciating Naqipour’s pursuit of such cooperation, Moqimi said domestic auto producers require the knowledge and expertise of the elite young generation to boost production, which will not materialize without the helping hand of ESFRD.
The two sides emphasized the necessity of clarifying the terms of collaboration in the framework of an agreement. They assigned relevant deputies with the task of drafting a comprehensive deal and expressed hope that their cooperation will deliver favorable results in the near future.
Iran’s major automakers, IKCO and SAIPA, as well as their affiliated auto parts makers, have forged links with the academia and tech ecosystem to upgrade their products with state-of-the-art technology and curb reliance on foreign resources.
Earlier Efforts
In February, Iranian auto parts manufacturer SAPCO signed multiple agreements with domestic knowledge-based companies, as part of efforts for minimizing dependency on foreign suppliers.
SAPCO, which is the major supplier for IKCO and SAIPA, 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' cooling system.
The signing happened during a tech event that was underway at the time in Tehran.
During the tech event, IKCO introduced 219 technological needs of its production line and invited tech units to offer smart solutions.
At the event, Moqimi said the domestic auto production sector’s ties with technology ecosystem help automakers promote innovation and upgrade the industry.
The Defense Ministry has lately been helping the local auto sector to bolster 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 these collaborations have 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 SMEs since last year (began in 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 output declined by 32.5% during the month ending on April 17 compared to a year earlier.
According to a report published by Iran’s Securities and Exchange Organization on Codal.ir, the semi-state Iranian automakers, IKCO and SAIPA, produced 22,998 passenger vehicles during the month, which is 11,110 less than their output a year earlier.
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.
