Iran’s automotive production increased by 117% during the month ending April 20, compared with the same period of last year.
According to data released by Securities and Exchange Organization on Codal.ir, Iran’s leading automakers, namely Iran Khodro (IKCO), SAIPA and its subsidiary Pars Khodro, produced 64,138 sedans during the month.
IKCO’s output rose to 33,819, which is 115.49% higher year-on-year, such that the share of passenger vehicles manufactured by the company was 15,694. Peugeot models had the lion’s share with 24,729 cars during the period and Samand was IKCO’s second most popular model with 3,774 units.
SAIPA produced 21,394 vehicles during the period, marking a 193% YOY increase. Tiba models topped the company’s production chart with 18,965 units.
Pars Khodro registered a 36.2% rise, producing 8,925 vehicles during the period compared to 6,551 in the year-ago month.
However, the production rate of automakers had fallen by 23.38% compared with the previous month when 83,709 units were produced. The decline is partially due to the extended Norouz holidays (March 21-April 2) and the recent surge in Covid cases.
IKCO’s output shows a 30% fall compared to a month earlier and SAIPA’s production rate had fallen by 17%. Pars Khodro’s data also show a 6.75% fall compared to the month to March 20.
Mismanagement and the pressure of US sanctions, now coupled with the Covid-19 outbreak, have derailed Iran’s auto industries. However, the government has stepped in to streamline the sector and cut its reliance on foreign resources.
Industry insiders have optimistically set the current year’s auto output target at 1.25 million sedans.
In the last fiscal year ending March 20, 2021, IKCO and SAIPA forged ties with knowledge-based teams to indigenize auto electronic parts in the hope of improving the quality and quantity of their output. Officials are optimistic that automakers will meet the goal this year.
Slashing Capital Flight
According to Farshad Moqimi, CEO of IKCO, localization of vehicle parts has saved up to $210 million for IKCO in the last two Iranian years (March 2019-21).
He said the achievement mainly resulted from the localization of 135 auto parts and vehicle design projects implemented with the help of SAPCO during the period.
“The projects have gradually curbed IKCO’s dependency on foreign suppliers,” he added.
According to IKCO’s chief, the company has produced 2,000 sets of vehicle frames and mechanical tools, saving up to $22 million with the support of industrial units affiliated with the Defense Ministry and knowledge-based companies.
“The company used to spend close to $360 million on the import of parts every year. Fortunately, indigenization efforts can raise the amount of saving to $248 million per year,” he added.
Moqimi noted that an additional 125 indigenization projects are underway in various fields, which are expected to reduce capital flight by €133 million per year.
“The ventures would save up to €76 million in auto parts and €26 million in raw materials,” he said.
“Optimization of the car manufacturing process will save €24 million and the localization of molds and auto mechanic equipment will save an additional €7 million.”
The IKCO chief noted that localization projects require an investment of €13 million, adding that IKCO intends to raise a portion of the funds by selling unproductive properties and assets, and procuring bank loans and private sector investment.
Moqimi said the imported component used in the production of each vehicle is €1,715, of which 67% are spent on importing raw materials and electronic components.
“The remaining 33% are spent on parts and vehicle frames, which can be reduced in cooperation with other industries, such as petrochemical and steel manufacturing sectors,” he added.
He urged local producers and industrial units to make their best efforts in implementing projects that bring the auto sector closer to self-sufficiency.
In line with the automaker’s indigenization objectives, SAPCO, Iran’s largest auto part manufacturer, is planning to produce vehicle frames, parts and mechanical tool sets for 630,000 IKCO cars in the current Iranian year (started March 21).
The plan is aimed at promoting localization in the sector and reducing auto part imports by utilizing the domestic industrial, scientific and technological capacities.
In addition, SAPCO is working on 131 localization projects in collaboration with knowledge-based companies. Projects worth 1 trillion rials ($4.18 million) are expected to cut capital flight by $150 million annually.
The parts maker also has 21 joint projects with the Defense Ministry, which are projected to save up to €33 million per year.
SAPCO has signed 23 collaboration agreements worth 2 trillion rials ($8.36 million) with the Islamic Revolution Guards Corps’ Aerospace Division. The deals are expected to slash imports by $46 million per annum.
SAIPA Attempts
In late November 2020, SAIPA announced that it is implementing 81 projects to localize high-tech auto parts for curbing the sector’s dependency on foreign resources.
Based on the automaker’s website Saipanews.com, the projects have been designed in collaboration with the Defense Ministry, the IRGC’s Aerospace Division and the Iranian Army’s Air Force.
Daryoush Golmohammadi, SAIPA’s deputy for strategic planning, said 28 joint ventures are being implemented with industrial units, affiliated to Defense Ministry.
“So far, seven sophisticated electronic car components have been localized and are ready for mass production,” he said.
Golmohammadi noted that SAIPA is producing 26 advanced parts with the help of the Aerospace Division.
“These items are undergoing tests and their production will begin, as soon as the prototypes are tested and verified,” he said.
The army’s Air Force is also cooperating with the automaker in 27 other localization projects, which the official said are in the design phase.
The targeted auto parts, which used to be imported, include engine control unit, modulator, injector, airbag, multimedia system, DC engines, electric sensors and digital ammeter.
“With the domestic production of these components, SAIPA can curb capital flight worth €94 million annually,” Golmohammadi said.
The automaker is also negotiating with the ministry for the joint production of GPS and radar systems for electric vehicles.
