EghtesadOnline: Iran’s major automaker SAIPA is implementing 81 projects to localize high-tech auto parts, hoping to curb the sector’s dependency on foreign suppliers.
The projects have been established in collaboration with the Defense Ministry, Aerospace Force of the Islamic Revolution Guards Corps and the Iranian Army’s Air Force, the automaker’s website Saipanews.com reported.
According to Daryoush Golmohammadi, SAIPA’s deputy for strategic planning, 28 joint ventures are being implemented along with industrial units, affiliated to Defense Ministry.
“So far, seven sophisticated electronic car components have been localized and are ready for mass production,” he said.
Golmohammadi noted that SAIPA is producing 26 advanced parts with the help of IRGC’s Aerospace Force.
“The production of these items is undergoing tests and will enter the production line, as soon as the prototypes are tested and verified,” he said.
The army’s Air Force is also cooperating with the automaker in 27 other localization projects, which Golmohammadi said are in the design phase.
The targeted auto parts, which used to be imported, include Engine Control Unit, modulator, injector, airbag, multimedia system, DC engines, electric sensors and digital ammeter.
With the local production of these components, SAIPA can curb capital flight by up to €94 million annually, the official said.
The automaker is also negotiating with the ministry for the joint production of GPS and radar systems for electric vehicles.
Overview of Collaborations
Transferring the know-how and capabilities of armed forces to the domestic auto industry has been placed high on the agenda of Iranian authorities.
In late September, the Iranian Army’s Air Force launched an initiative to strengthen relations with the major automaker SAIPA for sharing technologies, bolstering domestic auto production and reducing foreign dependency.
During a visit to SAIPA’s production and design departments, Commander of Iran Air Force Brigadier General Aziz Nasirzadeh said the army is willing to offer its latest knowhow and technological capacities to the automotive sector for designing and manufacturing high-tech components and engines.
Nasirzadeh said the result of the collaboration will benefit both sides.
“The army would like to use the capabilities of SAIPA and its subsidiary parts makers to produce special engines for drones. In return, the army would help the automaker develop complex auto components that are currently imported,” he said.
The air force chief said in case the projects are implemented judiciously, the US sanctions that have troubled the automotive sector will be easily overcome.
Also in May, the commander of IRGC’s Aerospace Force said the force can provide Iranian automakers with advanced technologies so that they can overcome their shortcomings and reduce their reliance on foreign firms.
Brigadier General Amir Ali Hajizadeh told reporters that IRGC’s Aerospace Force is ready to offer consultations to Iranian carmakers to address their shortcomings in the field of technology and car parts production.
He described reliance on local capabilities and domestic knowledge-based companies is the key to success.
“IRGC does not plan to take the helm of the industrial sector and start manufacturing cars, but our goal is to extend help and [provide carmakers with] consultations,” he added.
The Defense Ministry has also stepped in to support domestic automakers to curb their reliance on foreign parts.
In early June 2019, the ministry started sharing its technological capabilities with the two major domestic car companies, Iran Khodro Company and SAIPA.
With the ministry's support, the production of homegrown substitutes for key imported car parts was placed on the agenda.
In an integrated move, the ministry signed a deal with local car manufacturing company SAIPA in December 2019 to bolster collaboration in research and development, design, technical monitoring, safety standards and localization of parts.
Parts Makers’ Challenges
Arash Mohebbinejad, secretary of Iranian Auto Parts Manufacturers Association, says the dependency of industries on the international supply chain can decline by bolstering domestic production, although the goal could only be attained with the government support.
“While Iranian automakers have been able to curb reliance on foreign suppliers extensively, around 25% of key auto parts still need to be imported. Outdated technologies employed by Iranian carmakers have curbed their localization efforts,” he added.
Since 2018 when the US reimposed sanctions 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 261,000 rials in Tehran on Wednesday, though it hardly fetched 42,000 rials two years ago.
Criticizing the state’s inefficient management of the ailing automotive sector, Mohebbinejad said the sporadic money injections have only acted as temporary sedatives.
“Borrowings cannot solve the underlying issues of auto parts manufacturers and an effective strategy is required to revive the industry,” he said.
“Adding to the problem, contracts between automotive companies and parts makers are pending updates because of the new currency rates. Auto parts are still sold at extremely low prices, which adds to the parts makers’ financial woes.”
Calling on policymakers to modify the deals, Mohebbinejad suggested an increase in parts price to match higher operating costs.