A case of history repeating itself, or is it deja vu?
A historic deal signed between Iran’s second largest auto company, SAIPA, and PSA Group marks a new round of development in Iran’s automotive industry.
SAIPA’s deal with Citroen, its historic partner since 1966, will be the second signed between Iranian auto manufacturers and their French counterparts.
As part of the wider deal, SAIPA will overhaul its production facility and invest $300 million in development projects. It has also been announced that the group will stop the production of Tiba 2 and Pride models (Hold your applause).
Iran’s Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh told Mehr News Agency, “All possible measures have been implemented to keep our contracts and partnerships with foreign counterparts in line with the Resistance Economy.”
Nematzadeh said Citroen will be staging a comeback with the launch of three vehicles specifically designed for the local market.
“Citroen models will be sold throughout the country via a network dedicated exclusively to the brand,” he said, which is now the law.
“The first of three planned new Citroen models will be launched in Iran in 2018.”
The 50/50 joint venture lays the foundation for a strategic partnership between the two companies. It will cover the entire value chain, from the design stage right through to vehicle marketing.
Manufacturing will take place at the Kashan plant in Iran, which will be 50%-owned by PSA Group.
Likely Models?
The deal is likely to produce at least three new models, according to the original report from Reuters, but those models have not been announced yet.
It could be similar to Citroen’s offering in the North African region, while several Chinese-derived models may be making their way to the country.
Several Chinese models of Citroen, which are unique to that market, are the more likely contender to enter Iran as their manufacturing costs are relatively low.
One model of this partnership with Dongfeng is already on the verge of entering the local market, via SAIPA’s main competitor, Iran Khodro Group (IKCO) that said it will sell the small crossover C30 Cross for less than 500 million rials.
The company also produces several China-specific models such as the 2014 Citroen C3-XR,Citroen C5, Citroen C4L-a C+ top-of-the-range compact sedan version of the 2010 Citroen C4 hatchback-and 2013 Citroen C-Elysee.
Financial Tribune contacted PSA Group for further details on the new deal, but since it was the weekend, we only received an out of office email.
Beating Sister Brands?
The deal follows a joint venture deal signed last month between Peugeot and Iran Khodro, which has been confirmed this week.
PSA’s recently spun-off DS premium badge has also clinched a distribution agreement in the country and several showrooms will be set up.
How this deal plays into the wider principles of the Resistance Economy remain to be seen, but two deals in the space of as many months is a good indication for facilitating the transfer of knowhow and creating jobs, which are badly needed by the automotive sector that has experienced sagging fortunes.
The Resistance Economy is a set of principles outlined by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei to boost the domestic economy and cut reliance on oil revenues. It has been met positively by local manufacturers who claim they can meet international production standards.
Good for the French
French automakers are in desperate need to expand their global market share, as historically strong markets like Europe begin to transition away from the car ownership model of transport.
Several European carmakers have begun to restart operations in this area and the French understand that the driver for growth will come from emerging markets.
One of the best of these markets is Iran, which has suffered from a lack of investment in its auto industry.
The French advantage in Iran cannot be understated and PSA Group and Renault are well-poised to take advantage of all European manufacturers due to their long history in the country prior to sanctions in 2011.
Iranian car registrations approached 1.6 million cars at the 2011 peak, with PSA claiming almost 30% of the market. In 2015, the company lost a huge chunk of market share and now is facing increased competition from other Chinese manufacturers who are offering low-priced cars.
Carlos Tavares, chairman of the PSA Group Managing Board, said, “This agreement opens up a new chapter in our history of cooperation with SAIPA. Our aim is to provide our Iranian customers with modern vehicles that meet the highest comfort, safety and technology standards.”
One needs to remember that SAIPA started in 1968 as a project to produce the Citroen Dyane, it went under the name Jyane (or Jian) in Iran.
