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IKCO-Peugeot JV Rolls Again

IKCO-Peugeot JV Rolls AgainIKCO-Peugeot JV Rolls Again

France's Peugeot-Citroen (PSA) announced its return to Iran on June 21, signing a €400-million joint venture with its old partner Iran Khodro Company in Tehran.

The first cars produced under the new venture are set to hit Iranian roads in February 2017, with a target of producing 200,000 vehicles a year by 2018.

PSA is the first western carmaker to announce a return to Iran since most economic sanctions were lifted in January when a landmark nuclear deal with world powers took effect, AFP reported. It had signed an initial deal during a visit by Iran's President Hassan Rouhani to Paris in January.

"Today is the comeback of PSA to Iran. We are very proud," said Jean Christophe Quemard, who oversees PSA's Middle East and Africa operations.

"This company is committed to Iran and through this Iranian company, we show that we are really committed for the future and ready to invest in this country."

The 50-50 joint venture will manufacture three models—the Peugeot 208, the 2008 sport utility vehicle and 301 compact—using parts mostly made in Iran.

Some €400 million ($450 million) will be invested over the next five years, Quemard said at the ceremony, flanked by Iran Khodro CEO Hashem Yekezare.

The money will go into building manufacturing capacity in Tehran, as well as research and development, PSA said in a separate statement.

Yekezare said 30% of the cars produced will be exported to the Middle East and beyond.

  More JVs

PSA had to pull out of Iran, its second-largest market, in 2012 when the toughest sanctions were imposed.

Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh oversaw Tuesday's signing and said more joint ventures were on the way.

"We are optimistic. We hope to hold a similar ceremony for one of Iran Khodro's subsidiaries, Iran Khodro Diesel, with a German company," he said.

Nematzadeh did not name the German company, but Iran Khodro has been negotiating with Mercedes since the lifting of sanctions. PSA also said it was working on new contracts with Iran Khodro regarding the building of older models such as the Peugeot 405 and 206.

They are already being made in Iran and accounted for a third of new sales in the country last year at around 350,000 units, the company said.

But those units are not currently counted among PSA's 2.97 million global sales because they have been made entirely with Iranian and Chinese parts.

PSA paid a heavy cost for pulling out of Iran, with Yekezare stating in February that Iran Khodro would receive €427 million in compensation and debt write-offs for its French partner's sudden departure—a figure that was never confirmed by PSA.

Iran is considered one of the most promising growth markets for cars in the world, with only one car for every 100 people—six times less than in the European Union—and a large and discerning middle class hungry for new models after years of sanctions.

Iranian car production fell from 1.65 million units in 2011 to 740,000 in 2013, but PSA estimates the country will break the two-million mark by 2022.

Financialtribune.com