Iranian component manufacturers have faced many problems over the last two years, due to restrictions imposed by sanctions and the coronavirus pandemic.
However, despite these conditions, component producers planning to increase output and export are hampered by challenges related to liquidity, as they acutely require working capital.
Price controls of vehicles, which kept prices of auto parts low in contracts with automakers, have exacerbated these problems.
Donyaye Khodro interviewed Hamid Reza Pourshowqi, CEO of Yektarasa Sazeh Component Manufacturer Company, a manufacturer of all kinds of car electrical parts.
While many component makers have been grounded by problems, some have continued to design and introduce mass-produced products despite the hurdles.
Pourshowqi noted that the share of electronic components in each car is worth €520, which offers a great deal of scope for domestic producers.
“The activity of our group is in the field of production of car electrical parts and various relays. A new product [referring to a standardized car horn] that we have introduced is a strategic item, which we are producing in Iran with the approval of PSA or Peugeot-Citroen. None of the other horns produced in Iran has acquired this approval, because they lack its standards,” he said.
The CEO announced that the car horn, which is sold in the form of disc and Shell Tide, will be provided to Iran Khodro Industrial Group under a contract concluded with SAYPCO.
“Another product that we have produced this year is ‘Micro Relay’, which includes 4 and 5 stands. The next product is called ‘General Relay’ and is used in both home and automotive appliances. The important point is that in new cars, all the relays are collected in the box relay and thus are suitable for use in the Body Control Module system, i.e., the same control unit that ensures the correct and safe operation of car systems and reduces vehicle wirings.”
Investments, Jobs and Target Markets
Pourshowqi said the company has invested about 400 billion rials ($1.35 million) in three new production lines, namely ‘(vehicle) Horn Line’, which is both disc and Shell Tide, ‘Micro-Relay Line’ and ‘General Relay Line’, and employs 200 people.
“With the production of this new product, we will get at least 50% share of the Iran Khodro car horn supply and 50% share of SAIPA horn supply [two biggest auto producers in Iran]. We also have a 20% market share in micro relays. In other types of relays, we have about 40% of the total market share,” he said.
“We also work with big brands in the field of after-sales support service. I can say that we currently have about 30-35% market share of after-sales service in all relay components.”
Working Capital and Export Plans
The CEO stressed that working capital today is one of the biggest concerns of component makers.
“Unfortunately, the cost of financing in our country is very high. On the one hand, banks receive high-interest rates and demand heavy collateral for the provision of facilities. This has made competition difficult for component makers like our company,” he said.
“We want to talk to banks to give real producers a low-interest, unsecured loan. Our collateral is our production (plant). We now need 200 billion rials [$673,400] in working capital for three production lines, but we have visited every bank and each of them is asking for 300 billion rials [$1.01 million] as collateral,” he said.
Stressing that this demand is illogical, the official said, “Our problem is that the banks want heavy collateral and stop the [production] process with these actions. Unfortunately, they do not give the money to the real producer and the money goes more to brokers. In the same inflationary economic system, if they give loans to the real producer, it will both create jobs and capital, and prevent foreign currency from leaving the country.”
Referring to the market created in Iraq and Syria, Pourshowqi said if working capital is provided, his company will also have exports.
“The main problem of component makers today is liquidity, as I’ve said several times. Manufacturers like us, with only 200 billion rials of working capital, could create 200 sustainable jobs and export at least $3 million worth of parts to Syria and Iraq,” he said.
