Iranian auto parts manufacturer SAPCO has devised a scheme for the indigenization of metal and non-metal components worth €26 million for the current fiscal year (started March 21).
According to the company, the localization scheme has been split into 20 projects that are to employ high-tech solutions offered by the local technology ecosystem, Tasnim News Agency reported.
The production of isocyanate car seat cushions, raw material for dashboards, glass and loctite paste, auto lube, engine oil, brake fluids and advanced auto cabin metal sheets has been envisaged by SAPCO.
The company also plans to produce front coil springs, copper-based bearing alloys, magnesium ingots and raw material for injection molding of automotive plastic parts.
Auto component indigenization efforts were limited to the production of airbag cover material, polycarbonate material used in front lights, cabin metal sheets and metal powders last year.
Last year’s plans totally curbed the capital flight in the auto sector’s supply chain by €20 million, SAPCO announced.
The parts maker is also planning to produce vehicle frames, parts and mechanical tools for 630,000 cars produced by Iran automaker giant Iran Khodro Company (IKCO) in the current fiscal year.
The effort 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 fiscal frameworks and improving liquidity flow in the auto parts sector.
In addition, SAPCO is working on 131 localization projects in collaboration with knowledge-based companies. Projects worth 1 trillion rials ($4.14 million) are expected to cut capital flight by $150 million annually.
The parts maker has also lined up 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 ($8.3 million) with the Islamic Revolution Guards Corps’ Aerospace Division. The deals are expected to slash imports by $46 million per annum.
Difficult Times
While financial facilities are being poured in the auto sector, official data show Iranian automotive companies are in the red, owing parts makers 430 trillion rials ($1.78 billion).
According to Reza Rezaei, a member of Iran Auto Parts Makers Association, parts manufacturers are strategic players of the auto industry, who help materialize localization goals.
“They deserve more support from the government, but unfortunately the state has paid little attention to the sector,” he added.
Criticizing the cumbersome regulations in the banking system, Rezaei noted that parts makers are having a tough time getting bank facilities.
“Even when we are trying to import raw materials, customs officials are reluctant to cooperate, which makes import procedures more difficult,” he said.
Mohsen Razmkhah, another industry insider, earlier said Iran’s auto part production sector is struggling to procure the raw material and key parts from foreign sources due to the restrictive US sanctions.
He added that the industry has fallen into stagnation due to the soaring foreign exchange rates that make it almost impossible to secure key auto parts through imports.
Since the summer of 2018 when the US sanctions were reimposed against Iran, the rial has lost about two-thirds of its value and prices of almost all goods have soared to unprecedented highs. The greenback was trading at 241,000 rials in Tehran on Saturday, though it hardly fetched 42,000 rials a year earlier.
Criticizing the government’s inefficient management of the ailing sector, Razmkhah said loans allocated to the industry so far have acted more as temporary sedatives.
“Borrowings cannot solve the underlying issues of auto parts manufacturers and an effective strategy is required to revive the industry,” he concluded.
Armed Forces
To thwart the negative effects of US sanctions on the auto industry, the role of Iran’s armed forces is expected to grow in the key sector.
After the US reimposed sanctions against Iran, foreign automotive firms pulled out of the country. The armed forces, along with local tech firms, have filled up the void caused by foreign suppliers’ withdrawal from the Iranian market.
Iran’s Army, Defense Ministry and the Islamic Revolution Guards Corps’ Aerospace Force are leading the effort.
Sharing their modern technologies, the armed forces helped IKCO and SAIPA, Iran’s major automakers, and local parts makers to boost their output.
The assistance helped boost the production of high-tech components and upgrade machinery and industrial skills.
Earlier, speaking to Fars News Agency, Deputy Defense Minister for Legal and Parliamentary Affairs Brigadier General Reza Talaei-Nik said, “Our support will continue to fill the technological gaps in the domestic auto sector and improve the quality and volume of their production.”
Backing the military's role in the auto sector, the Iranian Parliament is developing a plan to further expand their presence. The plan calls for the establishment of a new auto production facility, which would be entirely run by military forces.
The proposal is still in the early stages of development and there is no assurance that it will be approved by the Guardians Council. However, efforts are being made to incorporate military technology in the domestic automobile industry.
