Iran’s Defense Ministry is set to share its technological capabilities with local car companies Iran Khodro (IKCO) and SAIPA to curb the industry’s reliance on foreign auto parts suppliers.
Iranian car companies depend on auto parts imports—especially for key electronics—for producing vehicles. Following the imposition of harsh US sanctions against Tehran, the local firms’ ties to the global supply chain were disrupted and parts imports began to trickle.
In a talk with the Persian daily, Iran, a deputy director at SAIPA said, “With the help of Defense Ministry, homegrown substitutes for key imported car parts are to be produced in Iran to curb the industry’s reliance on the global supply chain.”
“The parts are to be designed and produced as per an agreement between the car companies and the Defense Ministry,” Alireza Badkoubeh added.
According to the official, the agreement between carmakers and the ministry will yield results within six months.
Squeezed by Sanctions
Following the reimposition of US sanctions against Tehran last summer, ties between Iranian car companies and international auto part 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 and a piling up of unfinished cars in warehouses for lack of parts.
According to the Persian daily, some 300,000 vehicles are lying in SAIPA’s warehouses since the company is unable to finish the cars due to an auto parts shortage and the same situation applies to IKCO.
Precise numbers are not available.
Declining 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).
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.
During the month, car production plummeted by 47.1% from last year’s 76,807 cars.
Commercial vehicle production also registered a 49.3% year-on-year decline, as the number of trucks, buses, minibuses and pickups fell significantly from the previous year’s 3,987 units.
In the last fiscal year (ended March 20, 2019), a total of 955,923 cars and commercial vehicles were produced in Iran, indicating a 37.8% year-on-year decline.
