IKCO, Peugeot-Citroën Close to Landmark Deal

IKCO, Peugeot-Citroën Close to Landmark Deal
IKCO, Peugeot-Citroën Close to Landmark Deal

I ran Khodro (IKCO) and PSA Peugeot Citroën, the giant French automaker, have begun final negotiations over a cooperation contract, which began two years ago (in March 2013), Donye-e-Eqtesad reported on Saturday.

The two have made great progress in their talks, approaching satisfactory resuts of the contract, a source close to the matter said.

IKCO Managing Director Hashem Yekehzare said that the cooperation would be in the form of a “joint venture” in which Peugeot must ship 30 percent of the cars produced in Iran to foreign markets.

Yekehzare also added that if Peugeot does not fulfill the export obligation, the domestic sales of the company will be halted. He expressed his gratitude over the contract, noting that this is a win-win contract for both sides.

The 30 percent clause has received much media attention. While some, including the IKCO head, claim that the agreement would further accentuate the role of Iran’s auto industry in the region; several independent analysts have voiced concern that Peugeot might not stick to its commitments, referring to its violations of contract terms in the past.

According to the CEO back in March, the two companies would initially invest $162 million towards establishing a new factory for the joint company; thereafter gradually increasing the amount to $280 million. The joint company will be owned equally by both sides.

One industry watcher in London told the Financial Tribune that he expects the deal to be signed within the next 24 hours, adding, “I believe that the French need this contract as much as the Iranian side.”