As the ink dries on the deal Iran Khodro signed with PSA Peugeot Citroen last week, one regional country is likely to be the greatest beneficiary of the cessation of sanctions on the Islamic Republic.
Oman, the only Arab country with a proven record of international goodwill and impeccable reputation, worked hard to develop its ties with Iran even during sanctions. Not surprisingly, it has emerged as the leading beneficiary of the deal between Iran and the P5+1 (the US, Britain, Russia, China and France, plus Germany).
A new memorandum of understanding, which will lead to an investment of $200 million into a new production facility in the Persian Gulf littoral state, will see the country produce its first car. This is partly due to the joint venture between Iran Khodro and the country's respective parties.
The MoU was signed by Oman Investment Fund, Iran’s leading car manufacturer Iran Khodro and an Omani investor during Iran’s second exclusive exhibition held in the Omani capital, Muscat, last Wednesday.
Khalid Al Yahmadi, investment director at OIF, said a preliminary study had been conducted before signing the MoU and a detailed study will be carried out within the next three months about the requirements of Oman and other target markets as well as the brand and types of the cars required.
Al Yahmadi noted that the vehicles may be sold under a separate brand, according to the news website Al Bawaba.
However, Iran Khodro responded by saying they will hopefully be sending Dena, the latest sedan produced on the back of the Peugeot 405 chassis and platform.
The Omani company added that initial production would be 20,000 units a year.
Although the project may seem small compared to Iran's production numbers, it is a significant agreement between Iran and an Arab country. It is also a boon for Iran's plethora of carmakers who now have a third market to sell their auto parts in.
Duqm Export Gate
Commenting on the importance of the project, Mehdi Akbar, IKCO's director for regional affairs, said Duqm will become a major gate for exports to other countries, such as African states, in the near future, which opens an entirely new market for IKCO and Peugeot products.
“We are going to transfer the production knowhow to the Omanis,” he said.
Akbar noted that a number of Iranian experts will help launch the project but the Omani staff will work in the unit.
With this and similar ventures, Iran Khodro is materializing its long-suppressed dream of expanding beyond its westerly and northern neighbors.
The Iranian company has been able to grow its presence in its immediate neighboring market of Iraq because of the historical ties. It also helps that any assistance to develop Iraq's infrastructure was welcomed by its governments in recent times.
Omanis, though, offer an entirely different market for IKCO products. They have never been under embargoes of any sort, nor have they been at war with any of their neighbors. They also have had, like their peninsula neighbors, the full force of American auto companies shipping cars, lock stock and barrel, to the region.
Iran Khodro's offerings look weak compared to what cars are popular in the Omani market, but their prospects are bright because of the fact that Oman gets an opportunity to increase its automotive input and profile with this venture.
According to Best Selling Car blog, the Toyota Land Cruiser remains the bestselling car in the market in their recent Q4 report.
In fact, East Asian carmakers remain the number one favorite group for Omani buyers.
Toyota currently holds the lead with over 55% of the Omani market, selling five times more than any other brand. Nissan follows very far at 10.2% ahead of Hyundai at 9.7%, Kia at 5.3% and Lexus at 4.1%. Ford is the only non-Asian brand in the top 11 at number 8.
