In line with the state policy to localize auto parts production, two Iranian carmakers have signed agreements with local SMEs to provide some relief to the country’s auto industries that have been hard-pressed by US sanctions.
During a meeting held on Thursday in Tabriz, East Azarbaijan Province, SAIPA auto-manufacturing company and its affiliated part makers SAPCO, Sazehgostar and Mega Motor, signed a multilateral deal worth 5.75 trillion rials ($47.9 million) with small- and medium-sized enterprises, IRNA reported.
The deal envisages the localization of 14 key parts that used to be imported.
In addition, Iran Khodro (IKCO) signed a similar deal worth 7.3 trillion rials ($60.8 million) with local part makers to localize the technology for producing 17 auto parts.
According to the report, the effort will help Iran curb capital flight collectively to the tune of $102 million.
A deputy industries minister, several lawmakers, and provincial officials were also present at the signing ceremony.
Recently in Tehran, major automakers tapped the potentials of 32 local firms in boosting the domestic production of auto parts, with a contract worth 12 trillion rials ($100 million).
This deal was signed in early October for the production of 77 imported parts that generously added to the capital flight by €175 million annually.
In early September, SAPCO signed a deal with similar terms with Ferdowsi University of Mashhad and several SMEs based in Khorasan Razavi Province.
This agreement was worth 4.2 trillion rials ($35 million) for localizing the production of 34 car parts.
Mansour Mansouri, director of SAPCO, told reporters at the time, "In case we produce these parts locally, we will curb capital flight to the tune of €40 million."
In addition to industrial collaboration, the company also entered into an agreement with Ferdowsi University of Mashhad to facilitate the exchange of automotive know-how between graduates and experts.
Visiting tech centers and research institutes of the university, Mansouri emphasized that innovative and smart solutions developed by young talented teams can help boost the automotive industry.
Economic Hardships
The deals reflect the government's efforts to support local companies, help reduce the country's dependence on imports and promote the localization of industries.
Following the reimposition of US sanctions last summer, the Iranian rial lost almost 70% of its value over the past year. On Saturday, the US dollar was traded at 120,000 rials in Tehran while it hardly fetched 42,000 rials in March 2018.
In addition, many foreign suppliers of parts suspended collaboration with Iranian firms. Iran could no longer afford to import vehicles and parts in large volumes. As a result, local manufacturers faced a shortage of parts and failed to keep the domestic auto production going.
To preserve national currency reserves and cut the country's reliance on foreign companies, the government started to limit imports and paved the way for local manufacturers.
Of course, the success or failure of these strategies will only become evident in the future.
