Speculations Rife Over Fiat Entering Iran

Speculations are rampant that Fiat will announce signing a contract with a local company at the upcoming International Conference of Iran’s Auto Industry in February, according to sources in Tehran.

The fourth such conference will be held on February 12-13 with high-profile foreign automotive companies in attendance next year.

Persian Khodro, a local automotive website, has announced that the most important contract will be the agreement between Italy’s Fiat and Iran’s leading carmaker Iran Khodro Company (IKCO).

According to the local automotive news website, IKCO’s CEO Hashem Yekezare has declared that Fiat is a suitable business partner for his company and IKCO officials have claimed that Fiat can be the company’s fourth foreign business partner.

Yekezare stressed that Fiat, which owns Chrysler (not the other way round), is determined to enter the market.

“This is a serious matter,” the official said, “as Fiat will be able to bring technologies to Iran and use its joint platforms with Chrysler to manufacture cars in Iran.”

He noted that Fiat can be a leading partner and gain a large share of products manufactured and sold by IKCO.

Current negotiations are believed to give Fiat a 15% market share, though this percentage has not been confirmed by the parties concerned.

With the implementation of the Joint Comprehensive Plan of Action and the partial lifting of western sanctions, several leading carmakers have either renewed or forged new contracts with Iranian counterparts since January.

As ever, French auto manufacturers such as Renault-Citroen and Peugeot were the first to enter, seizing the opportunity of their first mover advantage from production contracts prior to the sanctions.

However, the situation was different for Germany’s Volkswagen that sought to work with the private sector and is believed to have signed a deal with truck maker Mammut Group earlier in October.

VW has had a difficult time working with Chinese counterparts. This experience has prompted the company to announce that upon entering Iran, it will not cooperate with governmental and semi-governmental auto manufacturers and would only work with a company from the private sector. VW has also said that it will work in Iran only if it can have its own exclusive production line; in other words, other brands should not use the production lines set up by the German automaker.

Fiat’s case is different, for they are part of the larger Fiat Chrysler Automobile group. This poses limitations, as American companies cannot work freely in Iran and may face legal hurdles.

Despite this, negotiations between Fiat and IKCO have been ongoing for quite some time, according to some sources in Iran.

Ahmad Pourfallah, the head of Iran-Italy Chamber of Commerce, noted that “what’s certain is that the contract will be finalized sooner or later.”

“An agreement has not yet been reached and we will continue negotiating until the conditions we expect are met,” he added.

He had stressed in October that “we have the upperhand in the negotiations” while adding that “in this time and age, no foreign company can impose its views upon us.”

Pourfallah announced that negotiations are also underway with other major global brands and a deal with Mercedes-Benz is imminent.

The official explained that the reason for the prolongation of negotiations with Fiat is that the talks are not limited to imports and sales.

“We are looking for joint investment and so must consider all aspects,” he said.

Pourfallah noted that for an agreement to become operational, “we also need to create infrastructure that could ease banking transactions.”

A 12-person Italian delegation travelled to Iran in March and visited the production lines of IKCO and its subsidiary parts maker ISACO.

The delegation included Fiat’s business development, product development, sales, marketing and exports teams.

During the visit, the company explored opportunities for cooperation, but the Fiat team did not name the cars they intend to sell in the Iranian market.