Rouhani's Combined Approach Proposal for Iran's Automotive Industry

Hassan Rouhani, at the third international automotive industry conference, first unveiled the Saina car, the latest creation from Saipa, and then drove the vehicle. But what kind of car is the Saina? The Saina is a new body design based on the platform of the Tiba car. The Tiba was unveiled during Mahmoud Ahmadinejad's presidency, who claimed that Iran could compete with major global automakers without needing foreign companies. However, the Tiba is a vehicle that combines the platforms of the Pride and Kia Rio, developed with the help of Italian designers. The technology of the Pride dates back 30 years, and the technology of the Rio is about 18 years old. At best, the Saina, unveiled by Hassan Rouhani, can be considered a car whose technology dates back 15 years. Perhaps this is why Rouhani stated in his speech at the conference: "The shortcut is to collaborate with foreign companies. We can utilize our own research, innovation, and youth to advance in national car design while also partnering with prominent global automakers in the automotive industry. This way, we will reach an optimal point in terms of technological capability, environmental standards, energy intensity, and public safety. The safety of the people, their health, and environmental health, as well as energy consumption, are issues that concern the general public and are very important to us." Over the past 18 years, Iran has implemented long-term programs to reduce fuel consumption, although these programs faced challenges and delays during Ahmadinejad's administration. During Mohammad Khatami's presidency, the Ministry of Oil, in collaboration with the Iran Khodro Engine Research Center and several German companies, began designing new engines with low fuel consumption and low emissions. The plan was to design three engines: the first was a 1700 cc dual-fuel engine capable of running on natural gas and gasoline, producing 110 horsepower. The second engine, also 1700 cc, with the help of a turbocharger, could produce 150 horsepower, while the last was a 1400 cc engine with 95 horsepower for small cars. By 2005, the design of the first engine was completed, but with the change of government, the project's execution slowed down. The crisis in Iran-Germany relations during those years made project implementation more difficult; nonetheless, production of the first engine began in 2010. However, the production of the other two engines was not feasible. Recently, Iran Khodro has started producing the second engine equipped with a turbocharger and has also installed a turbocharger on the third 1400 cc engine. Iran Khodro claims that the 1700 cc turbo engine produces 150 horsepower, while the 1400 cc turbo engine, named Eco Turbo, produces 125 horsepower. The first and second engines, the regular and turbocharged 1700 cc, comply with Euro 4 standards, while the 1400 cc turbo engine meets Euro 5 standards. Currently, Euro 5 standards for vehicle emissions are mandatory in the European Union. One of the points that caught Rouhani's attention during his visit to the Iranian automotive industry capabilities exhibition was these engines designed by Iran Khodro. These few designed engines can currently be considered the biggest technical achievement in Iran's automotive industry. Another topic discussed in recent days at the automotive conference was the potential reduction of import tariffs on vehicles. Rouhani also stated, "Among the supports for the automotive industry have been import bans and, in some cases, heavy tariffs, but this government support cannot be permanent. Government support for an industry against foreign industries has a duration that cannot be unlimited. It is important for us that our industry must have the necessary quality and competitive power. Unlimited support means removing an industry from global competition, which leads to decreased quality and increased prices." For over 30 years, Iran's automotive industry has been state-owned. Despite several attempts to reduce the government's share in the automotive industry to below 20 percent, these efforts have not been successful so far. Even with the transfer of some shares of automotive industries to non-specialized quasi-governmental sectors like social security in recent years, the management of this industry has faced a crisis. In the past two years, the government has tried to increase the influence and role of the Ministry of Industry, Mine, and Trade in managing the automotive industry. Even in recent weeks, pressure to change the board of directors at Saipa has increased. Nevertheless, Rouhani emphasized privatization in the automotive industry in his speech. He stated, "The policy of the eleventh government is that the automotive industry should be private and in the hands of the people. The government will never be a good manager in the industry, including the automotive industry and the economy as a whole. The automotive industry must be fully privatized and made competitive; creating one or two industrial enterprises and imposing them on a nation is not acceptable. For the government, the wishes and interests of the people are the first priority and legal duty. It is clear that we must create a competitive environment, and part of our cars must be exported. Privatization, making it competitive, and exporting are our principles in the automotive sector, and until these are achieved, we will not reach our goals." Contrary to the government's unsuccessful attempts to reduce its role in automotive companies in recent years, it is trying to encourage foreign investors to collaborate with domestic companies, a policy that has been successful since the nuclear agreement, with significant changes seen in new contracts compared to previous agreements. Rouhani also mentioned at the automotive industry conference, "We will collaborate with foreign companies on the condition that our parts manufacturers also have a global presence. For this, we welcome automotive companies to operate in Iran. Our welcoming does not mean that foreign automakers come only for consumption in an 80 million-strong society, but rather to collaborate with domestic automakers to capture part of the domestic and foreign market together." Mohammad Reza Nematzadeh, Minister of Industry, Mine, and Trade, also provided explanations about the strategic plan for the automotive industry at the international automotive conference, stating, "In this ten-year plan, Iran should achieve the first rank in the region, the fifth in Asia, and the eleventh in the world in the automotive sector. This plan anticipates the production of three million light vehicles and 120,000 commercial and heavy vehicles, with one-third of light vehicle production designated for export and one-fourth of commercial and heavy vehicle production for export. 50 percent of produced vehicles must be based on domestic design and manufacturing, while the remaining 50 percent will enter the market under foreign brands." The presence of foreign companies in the Iranian market has increased at the third international automotive conference. Henrik Henriksson, CEO of Scania, stated at the conference, "We intend to position Iran as a center for exporting our products in the region." Stephen Ghosn, a senior executive at Mercedes-Benz, also mentioned at the conference, "New products with the latest technology, which have minimal emissions and reduce harmful gas emissions, will be introduced in the heavy product line of Benz in Iran. We commit to localizing our production in Iran and transferring technology." Bernard Cambier, Vice President for Africa and the Middle East at Renault, emphasized at the third international automotive conference, "Iran is set to become the center for Renault products in the Middle East." Jean-Christophe Kummer, head of the Middle East division at Peugeot, also stated at the conference, "The current contract is completely different from previous contracts signed between this company and Iranian partners, as cooperation is now in the form of joint investment, and both sides mutually benefit from the advantages of joint investment, thus intertwining the future of both parties. In the past, our cooperation was only through parts sales and licensing." Currently, competition among foreign companies to enter the Iranian market has increased, with significant competition for collaboration with Iran Khodro. Hashim Yekehzareh, CEO of Iran Khodro Industrial Group, mentioned at the conference that Peugeot, Renault, Suzuki, and Benz are Iran Khodro's foreign partners, and negotiations with a fifth foreign partner are nearly finalized, with a sixth partner expected to join the current partners in the future. Despite these statements, the products showcased at this conference mainly included products from Chinese companies. Although Iran Khodro is actively seeking partners in Japan and Europe, Saipa, another major Iranian automaker, has leaned more towards collaboration with Chinese companies. However, Mehdi Jamali, CEO of Saipa, stated at the conference, "Currently, two platforms are being designed at Saipa's research center, based on which 20 products will be produced and enter the market." Despite such statements, informed sources indicate that these platforms are also being designed with the help of Chinese companies, and even in several cases, vehicles from Chinese companies are being marketed under the Saipa brand and Iranian names.