Benz to Return With a Bang

Benz to Return With a Bang
Benz to Return With a Bang

Daimler AG is planning a dramatic return to Iran with its sedans, trucks, vans and buses. It's in talks with Iran Khodro Co., the largest automaker in Iran, as western companies seek to benefit from the end of economic sanctions.

IKCO may sign a deal with the German maker of commercial vehicles and luxury cars as soon as three months from now, Chief Executive Officer Hashem Yekehzare told reporters in Tehran on Tuesday.

Yekehzare added that Daimler may open an office in Iran within two to three months .

"Mercedes-Benz is an old partner of Iran Khodro and it has expressed interest and readiness to restart work with us,” he said.

The Iranian CEO, however, declined to comment on the financial scope of future partnership with Mercedes-Benz parent body Daimler.

  Bright Prospects

The two companies will sign a 10-year contract for manufacturing commercial vehicles and a five-year contract to produce Mercedes-Benz passenger cars, presumably under Iran Khodro Diesel subsidiary, the Persian automotive website Asre Khodro reported.

“According to the agreement reached with Mercedes-Benz, a five-year deal will be signed soon based on which Setareh Iran as the importer and Top Khodro Company as the manufacturer will start distribution of Benz cars in Iran,” he said.

Daimler pulled out of Iran in 2010 amid rising political tensions over Iran's nuclear program. The move included giving up a 30 % stake in a diesel-engine joint venture with Iran Khodro and dropping plans to export three-axle trucks.

It is one of many European carmakers considering a return, lured by a market that could average 1.7 million vehicles in annual sales, according to estimates from IHS Automotive, Bloomberg reported.

“The position for us in terms of trucks and cars and our broad portfolio is a good one,” Daimler Chief Financial Officer Bodo Uebber told reporters on Tuesday in London.

“It’s too early to say how far that can be, but of course we are in contact with our business partners to have discussions how to restart."

Daimler declined to comment on specifics of talks with Iran Khodro.

Should German exports return to the pre-sanctions' levels of a decade ago, it could mean as much as an additional €4.5 billion ($4.9 billion) in revenue for the country’s companies, Deutsche Bank analysts said in a July 16 report

Last week, a contingent of German businessmen, headed by German Finance Minister Sigmar Gabriel, toured the central city of Isfahan.

The visit was aimed at assessing Isfahan’s economic capacities and exploring areas for expanding business cooperation with Iranian firms, IRNA reported at the time.

The 60-strong German delegation included representatives of Linde, Siemens, Mercedes, BASF, Volkswagen Group and GIZ.

  Dispute Over Renault

IKCO's director also said that although Renault had plans to set up a factory in Iran, the French company has not invested in the local auto market.

"With the collaboration of IKCO and Saipa, Renault was to produce over 300,000 vehicles in Iran, which did not materialize," he said.   

He also denied the fact that Renault will be cooperating only with Saipa in future and no longer with IKCO, a claim the former repeatedly made in recent months.

He said IKCO plans to produce 150,000 vehicles of several Renault models.

IKCO has considered Renault's KWID as one of its plans.

According to Yekehzare, the vehicle can compete with Saipa's assorted Pride models, which are produced locally.

Though Pride is one of the cheapest vehicles available in the Iranian market, everybody concedes it is highly overpriced. Local quality inspection organizations recurrently rated Saipa's Pride as the vehicle with the lowest quality.

"A new version of the Dacia-Logan model (L90) will be available on the market by the end of the current fiscal year," he said.

  Plans for Peugeot

Noting that Peugeot has not yet started operating in IKCO, Yekehzare said, "We are trying to work out a deal."

Earlier, 22% of Peugeot's global sales were in Iran. But once western sanctions were imposed on Iran over its nuclear energy program, Peugeot left Iran abruptly without completing the terms of the contract.

"The company needs to make up for past mistakes," the CEO said.  

No clear figures are, however, available as to how much Peugeot's sudden departure cost IKCO. Yekehzareh said "this matter needs to be clarified by our legal department."   

  New Suzuki Models

Iran Khodro's CEO also announced that three new models from Suzuki will also be produced.  

These include the small hatchback Swift, the hatchback Celerio and the sedan called the Ciaz. IKCO plans to produce the Celerio in large numbers, to gain more of the market lost to Saipa's inexpensive Tiba models.

Yekehzareh also noted that Volkswagen can be a viable business partner for Iran.

The company's presence in China suggests they are interested in long-term partnerships. With a joint venture, over 50,000 vehicles can be produced in Iran.  

"It is not yet clear which Iranian company will be working with Volkswagen," he said.