Major Iranian automaker Iran Khodro (IKCO) has slashed capital flight by $138 million through the localization of vehicle parts in the first eight months of the current Iranian year (March 20–Nov. 20).
Farshad Moqimi, CEO of the company, said this has been attained with the support of industrial units affiliated with the Defense Ministry and knowledge-based companies, IRIB News Agency reported.
“Several projects have been launched to gradually slash capital flight caused by auto parts imports, which amount can reach $248 million per year,” he added.
Moqimi noted that the projects are curbing production costs and reducing IKCO’s annual import bill by $180 million while the company used to spend close to $360 million on the import of parts every year.
He called on the banks to extend support to domestic parts makers for upgrading their machinery and asked relevant authorities to cut their tax rates.
“Encouraging local parts makers for manufacturing high-tech imported components are on IKCO’s agenda,” he said.
During a Friday meeting, Moqimi signed an agreement with Shiraz Electronic Industries Organization and its partners, including Iran Telecommunications Industries and Iranian Telecommunications Manufacturing Company. The agreement focused on developing electronic components for IKCO vehicles.
According to Mohammad Mehdi Izadi, the head of the organization, the agreement envisages the design and production of automobile electromechanical modules.
The automaker says the organization will soon become one of its large auto part suppliers.
Car Production Boost
State-backed automotive tech localization efforts and the strong role of knowledge-based and technology firms in the past several months have boosted the production rate of domestic automakers, especially IKCO.
The boost is evident in the company’s 43.6% rise in output registered in the eight months to Nov. 20 compared to the year-ago period.
According to data released by Securities and Exchange Organization on Codal.ir, IKCO produced 291,234 sedans during the eight months, which show an increase of 89,000 compared with last year’s corresponding figure.
Industry insiders believe that this could not be achieved in the absence of government support and the tech ecosystem.
Late August, the Industries Ministry said it is planning to invest 40 trillion rials ($153.84 million) in a research and development project for localizing key auto parts.
Mehdi Sadeqi-Niyaraki, a deputy industries minister, said several firms and state entities have joined forces to implement the project.
Major Iranian car companies are to spearhead the project by tapping into the potentials of local tech firms and knowledge-based companies, he added.
The Defense Ministry and the Islamic Revolution Guards Corps’ Aerospace Division will also contribute to the project. The ministry has lately launched projects to indigenize auto parts production and IRGC’s aerospace arm has become active in the field of automotive engineering and R&D over the past few years.
In addition, the Defense Ministry also started supporting domestic automakers to curb their reliance on foreign parts.
In June 2019, the ministry began to share its technological capabilities with local car companies. Since then, the production of homegrown substitutes for key imported car parts was placed high on the agenda.
The ministry helped produce domestic substitutes for 35 key auto parts in Iran to curb the industry’s reliance on the global supply chain.
Recently, the Iranian Army also joined the Defense Ministry in backing similar endeavors of domestic automakers.
Deputy Coordinator of Iran’s Air Force Brigadier General Mehdi Hadian told reporters that the army’s Air Force possesses high-tech equipment to support the domestic auto sector.
“The linkup can help mobilize this potential and fill the gaps on both sides,” he said.
In the face of economic constraints created by US sanctions in 2018, the auto sector focused on self-sufficiency in the production of auto parts, especially high-tech components.
These efforts have resulted in slashing the import of auto parts and saving foreign currencies.
Money-Saving Moves
In early October, IKCO announced that it has curbed capital flight significantly through the localization of 54 auto parts in the first six months of the current Iranian year (March 20-Sept. 21).
Hamid Moradi, IKCO’s deputy executive manager, noted that this has been accomplished, thanks to the support of industrial units affiliated to the Defense Ministry and knowledge-based companies.
“This is part of efforts to gradually slash the capital flight caused by auto parts imports, which can reach millions of dollars annually,” he added.
The official noted that the implementation of projects will save millions of dollars for the company in the second half of the current year.
Moradi announced that with more than 10,500 technicians and professionals, Iran Khodro is taking strong steps for “boosting production”, the strategy put forward by Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei, as a solution for overcoming headwinds faced by all economic and industrial sectors.
According to insiders, the Iranian auto industry can reduce capital flight by $2 billion, if the government increases localization efforts.
