SAIPA Group

Set to Achieve “Global Best Practice”
in Automotive Industry

Automotive industry is one of the industries in the developing countries that has always been, in the context of infant industry argument, subject to protective policies within the import-substitution strategy.
The automotive industry in newly-industrializing countries has typically evolved through a number of phases beginning with assembly of semi-knocked down (SKD) or completely knocked down (CKD) kits, moving via increased local content to full-scale manufacturing, and then to an export promotion phase. The last phase is to liberalize the car industry, which is by no means clear whether this will involve a qualitatively new phase, since few examples exist for any analysis.

All significant automotive industry companies have realized that they will have a bleak future, or none at all, unless they attain “Global Best Practice” and remain on that frontier

The first phase, car assembly, has taken 20 to 37 years in Brazil, Mexico, Taiwan, and Iran, while it took the Korean automotive industry only 11 years to mature to full-scale manufacturing.
The second phase, full-scale local manufacture of cars, has taken 7 to 12 years in Brazil and Mexico, while it took only 4 years in Korea to bring its automotive industry from full-scale manufacturing phase to the export promotion phase.
The export promotion phase in the automotive industry of Brazil and Mexico took 18 to 20 years, while Korea and Taiwan spent 8 to 12 years to liberalize their automobile manufacturing industry, after the export promotion phase.

All significant automotive industry companies have realized that they will have a bleak future, or none at all, unless they attain “Global Best Practice” and remain on that frontier. This is the force driving change in the industry in the previous as well as in the next decade. This force has been released through the successive alteration of a series of macro-economic and political conditions and of the attitudes underpinning them.

Three decades into its activity, SAIPA Group is directing all its policies and operations in line with a long-term strategic development plan

“Global Best Practice” standard has created an ongoing and endless process that has encouraged the mergers among different automotive companies. It has shaped the industrial designing, manufacturing, distribution and disposal activities into an integrated process under each single company’s management.
Under such global changes, total automotive assembly capacity in the world is distributed among three major regions of Japan (37%), the U.S. (27%), and Europe (27%), and the rest of the world (9%).
In such a world environment, the Iranian automotive industry is determined to survive and become an active producer and partner in the global automotive industry. It is, therefore, as if aiming at a moving and ever-evolving target. Hence, to succeed it needs to act faster and behave strategically in all areas such as designing, manufacturing, marketing, consumer satisfaction, and environment protection.
SAIPA Group, as a major automotive manufacturing group in Iran and the region, after 3 decades of activity, in full comprehension of the world automotive industry condition and its possible future perspectives, is directing all its policies and activities in line with a long-term strategic plan formulated three years ago. The objectives of this plan cover different spheres such as technology; domestic, regional and international market share; R & D; export promotion; development projects; quality standards; marketing and consumer services.
SAIPA Group has designed its future plans based on the recognition that some basic structures have been transformed, among them:

• The conviction that government would support companies, work standards and market protection policies on an indefinite basis. The trend has been for the government to reduce its protective role.

• The concomitant view that government had in its power to ensure corporate performance through manipulation of exchange rates, pump-priming of the national economy and similar measures. The redefinition of the nature of macroeconomic policy (centering it on the control of inflation) has taken away an important source of state influence in industrial affairs.

• The recognition that earlier policy packages had failed to promote industrial learning and to set in motion sustainable processes of technical and organizational improvements.

• The view that the privatization program, aiming at downsizing the government and promoting the private sector mentality in business activities, would benefit the national economy as a whole and unburden the state from business and engage it more effectively in state functions.

The SAIPA Group holding such convictions has set the following guidelines to promote its automotive manufacturing position in both domestic and regional markets:

1. Development and assimilation of the existing technologies.

2. Cooperation with world automotive companies in order to utilize modern technologies in terms of technology elements (technoware, infoware, orgaware and humanware), to enhance the Group’s position in regional and international markets with regard to the manufacture and export of light and heavy vehicles, automotive parts, and capital goods (machinery and equipment) needed in the automotive industry.

3. Concentration of the Group’s physical and human capital on the development and manufacture of limited varieties of cars in three classes (popular small, medium income, and upmarket class), to benefit from both the economies of scale, as well as the economies of scope.

4. Commitment and responsibility for the total life cycle of a car (from design to disposal) with emphasis on environmental protection and consumer satisfaction.

5. Development of different parts and modules manufacturing activities among capable and enterprising regions of the country, to contribute to the economic development of the nation and to utilize the untapped resources of the new regions.

Having reached a competitive stage of growth, SAIPA Group welcomes joint ventures and market-sharing with local and foreign investors

SAIPA Group owns several companies and plants engaged in various activities such as final assembly of light and heavy vehicles; modules and parts production; designing; heavy equipment and engineering goods production; quality control and inspection; distribution and after-sale services; data processing and informatics; etc.
To mention just one company as an example of the potentials and performances of the Group, Megamotor is not an exception.
Megamotor is producer of different types and models of engines, gear boxes, and axle modules. Around 35 to 40 percent of the production cost of a car, belongs to the engine, gearbox and axles. During its six-year activity, Megamotor has been able to produce modules and assemble the parts manufactured by more than 250 parts and components manufacturers.
Its achievements in terms of production can be visualized by the fact that the annual rates of growth in the production of engines, gearboxes and axles during its six years of activity have been 56.05%, 38.80%, and 23.75%, respectively.

SAIPA Group’s market shares in the domestic automotive market are as follows:

Passenger car                30%
Light trucks                   33%
Heavy-duty light trucks 81%
Mini-buses                    45%
Trucks                           26%

Total sale of light vehicles in the current year (March 2000-March 2001) is around 160,000 vehicles and the production target for the next year (March 2001-March 2002) is planned at 239,500 vehicles.
Total output of heavy vehicles in the current year is 3818 vehicles, and it is planned to increase to 8700 vehicles in the next year.
Total sales of SAIPA Group is projected to increase to $2.110 billion in the next year, 67 percent more than the present year figure.
According to the industry’s rule of thumb, when the local operations have grown big enough to become competitive, that is to make 200,000 or so cars a year, it becomes cost-effective to make large and complex components locally, rather than import them from abroad. It is in this stage that new investments become meaningful.
The SAIPA Group has reached that stage to welcome joint ventures and market-sharing with local and foreign investors.