Auto industry is called the “locomotive” of other industries and contributing to its growth will have a positive impact on other industries. One single solution for the growth of this industry cannot be applied in all societies; each country, with its capabilities and certain circumstances, needs a special solution. In Iran we have been pursuing solutions based on the same consideration and, relying on our experience, we attempt to compensate for the past underdevelopment. Auto industry in Iran is more than 30 years old, but we have been able to achieve a desirable status by adopting new strategies only in the recent years.

When talking about exporting commodities, one should look at the relative advantages of a specific country, which is an issue of importance in the globalization process. The way toward globalization is developing the capabilities which are of value to the world. If a country possesses low-priced energy and labor force, there is no reason why it cannot compete in some fields with others.
What we have on agenda in Saipa Auto Industries is “becoming a global auto manufacturer”. Thus it is necessary to pass all the phases and measures that other global companies have taken to reach that position.
After the first step, which is “assembling foreign-made parts”, the second phase for us is manufacturing of parts domestically. We call this the “revival of the national relative advantages”. In this phase we endeavor to strengthen the manufacturing activities in the country, trying to make the industry more independent and, above all, we pursue the strategy of making high quality products which are suitable for export.
However, this is only part of a wider development strategy in the auto industry.
The third step in this strategy is designing machinery in order to reduce the need for re-investment in technology, to localize the potentials and to create capacities, and finally to develop human resources – which is the most significant resource – in the industry.
Fortunately, we have completed the latter step successfully: In Saipa, we are now able to design the production line for any type of automobile with varying degrees of automation. The fourth step of our development strategy is “designing and developing the product”. We have launched a joint effort with foreign companies for the purpose of benefiting from the software and hardware that we have procured. The last step in this strategy is “exporting” the products.
The question here is that in a market where production capacity is more than what the market demands, how can one be successful in the export field? The content of globalization is exporting relative advantages to other countries. When we are successful in strengthening national relative advantages in making a product, we can be sure that we would be able to find the market for it.
Relying on the said strategies, we have been in a good position vis-à-vis our foreign partners. The indication of this is that we have been able to finalize a contract with France’s Citroen on the basis of foreign exchange balance. The French side has agreed to purchase the middle-class Xantia cars, parts and engineering services from Iran, in return for the parts which it offers to us.

So far there has been no quota system with respect to foreign exchange balance. In line with the policies of the Ministry of Industries, we are to sign new contracts based on our foreign exchange balance. Saipa is pleased to announce that it has signed the first contract on the said basis with Citroen of France.
Saipa Group has cooperation with other foreign companies. We have a contract with Kia from South Korea to produce Pride cars under the trademarks “Nasim” and “Saba” in the country. This contract is not based on foreign exchange balance since it was signed previously, but negotiations are under way with Kia to change it to a foreign exchange balance contract. We have convinced them to give us the permit to export the cars under the Kia trademark.
A Kia team has been stationed in Saipa to assist the company in reaching the desired level of quality until the year-end so that we would be able to export cars to our target markets. The team has had a good progress so far according to the schedule. One solution to make your way to the global markets is to use the network of a partner company. So far, Saipa has signed a trilateral contract with Syria and Kia to export 600 Kia cars to Syria, for which the first L/C has been opened and a part of the shipment has been made.
Moreover, Saipa is collaborating with Nissan based on a new contract for production of single-cabin and double-cabin pickups in Pars Khodro plant. Regarding diesel vehicles, Saipa Diesel is working with Volvo based on the foreign exchange balance, and Zamyad is working on the production of minibuses with Iveco.

Having acquired Zamyad and Pars Khodro companies, Saipa has now become a giant auto-manufacturing group. We have published a report showing Saipa’s market share in the past five years: The market share for Saipa passenger vehicles from March 1996 until November 2000 has increased from 25.98% to 33.20%.
In the current year, Saipa experienced the highest production rate: from March to November 2000 our production has been equal to that of the period of March 1999 to March 2000.
The whole Saipa Group produced 35,272 automobiles in 1996 while its market share was 27.9 %, but in the period of March-November 2000, 45,182 cars have been produced, while the market share has increased to 33.35%.

In a general perspective, we cannot stop the import of cars, but at the present juncture, we oppose to this trend for the following reasons:

1. The way toward globalization, as I said, is to raise capacities by manufacturing auto parts in the country;

2. Unemployment is a big problem and we, as managers, do not want, and should not give in our domestic market to rival companies at the cost of our national interests. That would certainly be followed by losing hundreds of job opportunities in the country and would discourage those who have invested in the auto industry.

To survive in the global market we have to develop our capacities and this cannot be achieved overnight. Our nation should pay the cost for this transition phase, i.e. to achieve the technology and the capability to produce high quality automobiles.
Import of automobiles is a must for joining the globalization process, but it should be done after the country has reached a capacity to produce competitive and high quality cars.