Car production capacity could be increased by 50%, provided prerequisites created by growth in inflation should be put in place in the current fiscal year (started March 21), secretary of the Association of Homogeneous Propulsion Industries and Component Manufacturers said.
Arash Mohebbinejad also told Khabar Khodro that these prerequisites include providing liquidity to automakers, reforming the pricing system and amending the contracts of parts manufacturers.
“According to the forecast of all economists, the country will face high inflation in the fiscal 2022-23, so in an inflationary economy with a constant volume of liquidity, production will decrease. Therefore, if the output is to increase by 50%, the automotive industry needs to have the appropriate liquidity to compensate for inflation and increase production,” he said.
The official stressed that changing the sources of liquidity is one of the necessities, so reducing the payment period, obtaining bank facilities and using similar methods will help resolve the problems of parts manufacturers.
Mohebbinejad stated that command pricing causes production losses and creates obstacles to increasing car supply, which extends to the supply chain and if the whole enterprise is not economically viable, the production lines will face the risk of shutdown.
“At present, the automaker does not fulfill its obligations to component makers and expects the parts manufacturer to fulfill all its obligations,” he said, adding that the contracts of automakers with parts manufacturers are unbalanced.
“In such an environment, a steady increase in the production of parts and cars cannot be expected unless the requirements and prerequisites are met, because only then, a steady increase in car production and quality improvement will happen,” he said.
Mohebbinejad noted that car pricing methods should be improved to increase production.
“Increasing supply and liquidity are all interdependent. Increasing supply will compensate the demand vacuum and reduce the gap between supply and demand, which will lead to price equilibrium in the market,” he concluded.
Plans to Meet Car Demand Outlined
The Ministry of Industries, Mining and Trade plans to meet car demand by placing imports and higher production on its agenda, the head of the ministry’s Automotive Industry Office said.
“In the current fiscal year [March 2022-23], 1.6 million vehicles will be produced, of which 1.4 million will be based on domestic platforms. Increasing the production is the most important short-term strategy, provided sanctions don’t trigger new developments,” Abdollah Tavakkoli Lahijani was also quoted as saying by IRNA.
The official noted that rising car production will help eliminate car lotteries, such that the lottery for SAIPA’s Shahin has been cancelled.
“Iran’s two largest automakers are now working to produce economy cars and a consortium of component makers has been formed to assist the initiative,” he said, while pointing out that supply chain financing will reduce the automakers' overhead costs.
Lahijani said promoting direct purchase from top-tier manufacturers, designing new cars, reducing logistics, increasing cooperation between carmakers and forging synergies could prepare the ground for the rapid production of economy cars.
“Automotive standards are not difficult to uphold and they are being enforced in the new platforms,” he added.
The new platforms have been designed in a way that the enforcement of standards help lower prices when mass production of cars begins.
According to the official, the Trade Promotion Organization has studied potential export markets and the vehicles built on the four main platforms will be exported to target countries.
“The Fourth Industrial Revolution has helped develop the automotive industry with the expansion of the four major fields of electrification, connected cars, self-driving cars and shared transportation,” Lahijani said.
“At every turn, some new actors emerge and for countries like Iran and domestic automakers, this is a historic opportunity to have a say with the help of knowledge-based companies.”
Abolition of Car Lotteries Starts With Shahin
SAIPA Automotive Group has started the sale of Shahin from April 19, without holding a car lottery, in response to high public demand.
Accordingly, the delivery time of this car is a maximum of 90 days and in case of a delay, as per the contract, a compensation equivalent to 36% of the annual profit (3% monthly) will be calculated on a daily basis.
Shahin can be considered the first positive step of SAIPA to repair its reputation after years of Pride production and is considered a turning point in the automaker’s history, the news portal of Donyaye Khodro reported.
Shahin was designed at a time when the Iranian car industry was facing tough US sanctions and problems related to supply chain and car manufacture.
This showed SAIPA's determination to produce a modern car with a completely different design. It intends to further incorporate changes and updates in Shahin and the Aria Crossover.
SAIPA's main efforts could be seen in Shahin that complies with safety standards, including airbag, crash testing and pedestrian collision standards, which have been obtained from a reputable European institution. In fact, it is the first Iranian car manufacturer to fully show the development and safety features of Shahin by publishing videos and results of Shahin crash and airbag tests.
Shahin uses a turbocharged M15GSI engine. The base version of this engine had previously been used on SAIPA X 200 platform products (Tiba, Saina and Quick), but to fit the Shahin’s weight of 1,250 kg, some parts have been replaced, modified and upgraded.
The car’s engine is also equipped with electric throttle, VVT system and Euro 5 emission standards that ensure lower fuel consumption and vibration with more acceleration and power.
