Car manufacturer in expansion drive

07 June 2002

Iran Khodro Company (IKCO)plans to cement its position as a leading local and regional car manufacturer by increasing production capacity, adding a new passenger car to its production line and expanding into neighbouring markets. The company is also negotiating co-operating agreements with Iran's second largest automobile manufacturer, SAIPA, and Germany's car giant, DaimlerChrysler.

'We plan to increase production of passenger cars to more then 500,000 units from 350,000 units within two years,' vice-chairman of the board of directors at IKCO R Esmaeili told MEED in late May. Much of this new capacity is to come from rising production of the company's flagship vehicle, the Samand, also known as the X7 or the 'national car' (MEED 6:7:01).

According to Esmaeili, demand for the car, which was launched in 2001, is high both domestically and regionally. 'We have already had inquiries from dealers in the UAE to represent the Samand,' says Esmaeili. 'We also have a partner in Egypt and have established relationships with Indian companies.'

IKCO plans to produce 100,000 units of the Samand by 2003, rising to more than 200,000 units by 2006. More than 85 per cent of the car consists of locally manufactured parts.

Within three years, IKCO's production line is set to be complemented by a successor model to the Peykan, which has been produced since it was first launched in 1967 in co-operation with British Hillman. Like the Samand, the Pika will be designed in the Iran Khodro Research Center by Iranian engineers and incorporate a high level of local content.

'The Pika will replace the Peykan and will be a completely newly developed model,' says Esmaeili. 'It will be an economy passenger and family car with a target price of about $3,000.'

In an attempt to prepare IKCO for the possible opening up of the highly protected Iranian market over the next two-three years, the company has also begun negotiations with SAIPA to explore ways of possible future co-operation. Esmaeili says talks are revolving around establishing a common vehicle platform, but could eventually lead to the formation of a joint company.

IKCO is also working on strengthening its ties with DaimlerChrysler. Both companies in early May signed a preliminary agreement for setting up a manufacturing site for the assembly of two Mercedes-Benz models in Iran. 'We signed an MoU [memorandum of understanding] with DaimlerChrysler for a 50:50 joint venture to produce A-class and E-class models,' says Esmaeili. 'We are now continuing negotiations.'

According to Iranian legal specifications, the minimum requirement for locally manufactured parts for the vehicles will be 26 per cent. IKCO and DaimlerChrysler already jointly manufacture gearboxes, vehicle axles and steering wheels. In addition, the German group holds a 35 per cent stake in an IKCO engine production plant in Tabriz.

Under a joint venture contract with France's PSA Peugeot Citroen, the Iranian company also produces Peugeot 206 and 405 passenger vehicles.

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