STIFF COMPETITION

Iran 2017 | INDUSTRY & MINING | INTERVIEW

TBY talks to Mehdi Jamali, Group President and Vice Chairman of SAIPA, on the advantages of joint production, the roots of rising demand, and the huge potential for regional growth.

 Mehdi Jamali
BIOGRAPHY
Mehdi Jamali is Group President and Vice Chairman of SAIPA. Previously, Jamali served as CEO of Industry and Mine Leasing Co. and Atiye Damavand Investment Co. Moreover, he served as Vice President of Budget and Planning at ETKA Organization, General Manager of Economic Affairs at Civil Servants Pension Fund, Chairman of Iran Khodro Investment Co., and as Member of the Board at Small Industries and Industrial Parks Organization. He holds a PhD in economic management.

SAIPA is a dominant brand facing tough domestic competition. How can you increase domestic market?

After a period of recession in the Iranian market, particularly in the automotive sector, we are seeing the vehicle market expand again. Average income has increased, which boosts the demand for cars, which results in fierce competition with numerous competitors from around the world entering the Iranian market. SAIPA also has some domestic competitors whose activities have increased considerably. Before I joined SAIPA, its domestic market share was 34%; now, despite this increased competition, it is 41% and growing. In 2016, we increased production by 15%, which the market can absorb.

Are you looking for partnerships with international industrial conglomerates?

We want to increase our exports to neighboring countries and are considering partnerships with overseas conglomerates to facilitate this. For example, SAIPA and Citroën have a joint venture in one of SAIPA's largest production factories in Kashan. This is a 50-50 joint venture with a solid business plan. Within two years, we will have three products from Citroën produced at this plant. SAIPA produced 600,000 cars in 2016, a figure that will be 1 million by 2020. To do so, we will have joint ventures with several companies, such as Citroën and Kia. Under these, 30% of the products will be dedicated to exports. By 2020, 50% will be produced domestically and 50% in joint partnerships.

To which countries is SAIPA exporting and which are part of your international growth strategy?

Over the last decade, we have been the largest Iranian exporter of cars, at 70% of all automotive exports. We have plants producing cars in several countries, including Iraq, Syria, Venezuela, and Azerbaijan. The most recent addition is Algeria, where we opened a plant in 2016. We fully own some of these plants, while others are part of a joint venture. We are also focusing on the production and export of vehicle parts both independently and with companies like Citroën.

How are you working to become an international automaker?

Our international marketing shows that SAIPA has the ability to compete in the regional market, which was proven when we managed to export the most cars during sanctions. Our cars are affordable and suit the purchasing power in this region better than most other players. Therefore our strategy is to focus on designing and manufacturing cars that our neighboring consumers can afford. We have contracts with Chinese carmakers because they can produce affordable cars at low prices. Therefore, in addition to our cooperation with Citroën and Kia, which produce higher-priced cars, we have been working with Chang'an, Brilliance, and Zotye from China to create affordable products for the regional market. Citroën has purchased 50% of the shares in SAIPA Kashan, and the members of the board of this joint venture have already started their activities in Iran. Within a few months, we will launch the first products under this joint venture. In terms of engines, we have worked with Citroën, which has so far invested USD100 million. It will increase this figure to USD300 million within the next few years. Meanwhile, Brilliance is investing USD100 million now, a figure expected to reach USD500 million in five years.

What is your outlook for the upcoming years?

After years of delay, we now see great opportunities for innovation in the sector. This is a great opportunity for international high-tech companies to come and invest in Iran. Consumer demand for cars in Iran has increased significantly to about 2 million cars per year. In addition to the potential for an extra million in the region, that makes 3 million altogether. Average incomes are increasing rapidly, and the population is young, so demand will grow as quickly as investment. Our turnover was USD3 billion three years ago, USD5 billion in 2016, and projected to be USD8 billion by 2019.