The Ministry of Industries, Mining and Trade plans to curb imports worth $3.4 billion in domestic industries during the current fiscal year (started March 21), a considerable share of which pertains to the automotive sector.
According to Deputy Industries Minister Saeid Zarandi, the goal is to be achieved through 14 localization projects, the ministry’s website reported.
The official added that the ministry is committed to streamlining car production and supporting auto parts makers and tire manufacturers.
“The ministry also plans to help revive 2,000 industrial businesses in the coming months. The businesses were closed due to Covid-19 and economic difficulties,” he said, adding that a large number of these firms are linked to automotive industries.
He noted that with state support and the technical assistance of knowledge-based companies, 1.2 million passenger vehicles are set to be produced in the current fiscal year.
Pointing to last year’s plan for producing one million cars, Zarandi said the two major automakers made their best efforts to increase their output and almost reached the goal.
The achievement was gained despite the destructive effect of US sanctions since the winter of 2018, which was further marred by the outbreak of novel coronavirus in February 2020.
“Iran’s auto industry recorded a 4.3% production increase year-on-year,” he added, stressing that the current year’s goal is achievable.
Localization Resume
Based on the official data, the major Iranian automaker Iran Khodro (IKCO) has slashed capital flight by $210 million through the localization of vehicle parts in the last two Iranian years (March 2019-21).
Farshad Moqimi, CEO of the company, said IKCO has implemented 135 auto parts localization and vehicle design projects in the past two years with the help of Iranian auto parts manufacturer SAPCO.
“The projects have gradually curbed IKCO’s dependency on foreign suppliers,” he said.
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 said.
SAPCO Projects Underway
In line with expanding local production, SAPCO is planning to produce vehicle frames, parts and mechanical tools for 630,000 IKCO cars in the current fiscal year.
The plan is aimed at promoting localization by reducing auto part imports and utilizing the domestic industrial, scientific and technological capacities.
In terms of fiscal management, SAPCO has prioritized the revision of pricing mechanism by employing modern fiscal frameworks and improving liquidity flow in auto parts sector.
In addition, SAPCO is working on 131 localization projects in collaboration with knowledge-based companies. Projects worth 1 trillion rials ($4 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 million) with the Islamic Revolution Guards Corps’ Aerospace Division. The deals are expected to slash imports by $46 million per annum.
Car Production Surges
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.
The surge is evident in the sector’s 4.33% rise in output in the year ending March 20 compared to the previous year.
According to a report published by Iran’s Securities and Exchange Organization on Codal.ir, Iran produced 39,000 more cars compared to the year before.
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 ($180.58 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 IRGC’s Aerospace Division will also contribute to the project. The former has launched projects to indigenize auto parts production and the latter has become active in the field of automotive engineering and R&D over the past few years.
In June 2019, the Defense 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 counterparts 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. However, several fiscal issues are yet to be resolved for overhauling auto localization.
