Peugeot-Citroen Not to Quit Iran Market

Executive vice president of Groupe PSA for Africa and Middle East has declared that the automotive conglomerate will continue its operations in Iran.

During an interview with Financial Tribune’s sister newspaper Donya-e-Eqtesad, Jean-Christophe Quemard added that Groupe PSA follows international regulations with regard to its presence in Iran.

“The status quo has not changed, therefore Groupe PSA will continue its operations in Iran,” he clarified.

Groupe PSA is a French multinational manufacturer of automobiles and motorcycles sold under the Peugeot, Citroen, DS Automobiles, Opel and Vauxhall Motors brands. 

Earlier, French President Emmanuel Macron said the country is determined to preserve the 2015 nuclear agreement in the face of the hardened US position. Quemard noted that Groupe PSA will follow Macron’s lead.

“There is nothing to be worried about. There is no hurdle in the way of Groupe PSA’s plans for Iran,” he said.

The real-estate mogul turned president, Donald Trump, has given the US Congress 60 days to decide whether to reimpose economic sanctions on Iran, lifted under the pact Iran signed with major powers in exchange for scaling down the country’s nuclear program.

According to French Foreign Minister Jean-Yves Le Drian, the country hopes that the US Congress will not jeopardize a “good agreement” because curtailing it would provoke an “infernal and very dangerous” situation.

Just hours after Trump’s declaration, UK Prime Minister Theresa May, German Chancellor Angela Merkel and Macron issued a joint statement reaffirming the commitment to the nuclear accord.

Macron, who had called on Iranian President Hassan Rouhani on Friday, discussed a potential trip to Iran, which would be the first by a French leader since the 1979 Islamic Revolution.

US Secretary of State Rex Tillerson has also said the Trump administration is not seeking to disrupt European business deals with Iran.

“The president has been pretty clear that it is not his intent to interfere with business deals that the Europeans may have underway with Iran,” Tillerson said in a Thursday interview in his office.

 JVs With IKCO, SAIPA

The French automotive giant has entered into separate joint ventures with Iran Khodro and SAIPA, the domestic local automakers.

IKCO and Groupe PSA’s Peugeot brand signed a €400-million deal in June 2016. Through the 50-50 joint venture, three models, namely Peugeot 208, 2008 SUV and 301 compact, are to be manufactured in Iran. The joint venture has been named Iran Khodro Automobiles Peugeot.

The French automotive group has also forged a joint production agreement with SAIPA through its Citroen brand.

Unveiled in July 2016, the deal obliges the Paris-based carmaker to invest €300 million over the next five years for the development and production of three Citroen models in the country.

Both local companies are notorious for spiking the prices of their products to an exorbitantly higher level, as they enjoy an absolute monopoly.

Since foreign car manufacturers must partner with the so-called domestic automakers that are mostly assemblers, foreign brands are also priced significantly higher than what they usually cost in international markets.

 New Entrants

The first locally assembled product of IKAP to arrive on Iranian roads is Peugeot 2008. The model is priced at 1.04 billion rials ($26,000) in the country, almost $9,000 over and above the price in international markets.

When questioned why Peugeot 2008 is priced so high, Quemard said less than 20% of the car’s parts are produced in Iran and the rest are imported, adding that the high foreign exchange rate compelled the French company and its local partner to raise prices.

He clarified that to lower prices, the share of locally manufactured parts in IKAP products should increase.

According to data released by the Ministry of Industries, only four units of the model have been produced domestically.

This is while the company started the presale of Peugeot 2008 months ago, for the registration of which some 5,000 customers paid a deposit of 600 million rials ($15,000) each.

IKCO promised to deliver the vehicle by September, but so far the company has only delivered 50 units that were largely imported as completely-built up kits.

The car is currently selling for 1,160 million rials ($29,000) in the open market.

In response to reporters questioning the low output rate of IKAP’s plant, Quemard said, “Peugeot auto parts required for production are stuck in customs. This is not an uncommon incident in the global industry. The problem will be solved soon.”

The local government is set to introduce new regulations on auto and parts imports, which has held up the entry of cars in some cases. The move has been criticized by domestic automakers as being disruptive.

Earlier and during talks with the head of Industrial Development and Renovation Organization of Iran, Mansour Moazzemi, Quemard said, “Lack of investments for purchasing and importing auto parts is impeding Peugeot operations in the country.”

According to sources familiar with the deal, IKCO has failed to shell out the money for importing auto parts.

Iran is one of the major target markets of the automotive group. According to latest statistics released by the Ministry of Industries, during the first six months of the current fiscal (started March 21), locally manufactured/assembled Peugeot models led IKCO production and sales.

The company produces Peugeot 405, 206 and 2008 under license from the French auto giant. Data say 205,509 units of Peugeot cars were produced by IKCO and 197,539 worth 58.9 trillion rials ($1.4 billion) were sold in the period.