Deputy director of SAIPA-Citroen joint venture Yann Martin says the French automotive company is committed to Iran business. According to him, in the face of the belligerent US President Donald Trump’s announcement that he is withdrawing from the Iran nuclear deal, Citroen has adopted a wait-and-see strategy.
In an interview with IRNA, Martin said, “We have strong ties with Iran. Remaining in the country and continuing our operations are top of our priorities.”
SAIPA and PSA’s brand Citroen signed a 50-50 joint venture in late 2016 under which the Paris-based carmaker has undertaken to invest more than €300 million ($352 million) in Iran during the next five years. In addition to C3, another Citroen model, namely, C4 will also be manufactured in Iran.
In the interview, Martin said, “We are waiting on the EU’s decision over Trump’s move,” implying it is yet early to predict the future of the JV.
He added, “Citroen will stay in line with the EU authorities’ decision [in regard to Trump’s move] and will comply with the EU rules.” According to him, France is endeavoring to uphold the Joint Comprehensive Plan of Action.
High Stakes
According to Martin, “When [in 2011], Peugeot was forced to terminate its operations in Iran due to sanctions and financial and political pressures, the French company [and its workers] suffered [just like their Iranian peers].”
The official noted that the French automaker has opted to adopt a wait-and-see approach. “We need to wait at least two weeks and see what will eventually emerge [out of the current situation].”
Following Trump’s decision to renege on the nuclear deal with Iran, French carmaker and owner of Citroen and Peugeot brands PSA Group initially said it hoped the European Union would adopt a common position on Iran.
“Like other economic players, we are following the evolution of the matter, and are also following the EU’s official position on this topic,” said a spokesman for PSA, adding that the group hoped the EU’s position regarding Iran would be a “singular” one, Reuters reported.
In addition to Citroen, the other major PSA brand Peugeot has forged a joint venture agreement with Iran’s largest carmaker Iran Khodro.
Localization Agenda
Localization is one of the oft-mentioned mantras of the government in regulating new automotive contracts with foreign firms.
As per a notification issued by the Ministry of Industries in November 2017, at least 40% of the vehicle parts used in joint ventures with foreign carmakers should be manufactured in Iran by March 2018.
If the local companies fail to comply, significantly higher import tariffs will be levied on the auto parts imported by the firms.
Martin was questioned over the matter since major parts used in the C3, including the engine and the gearbox, are imported into the country and reportedly locally manufactured parts merely have a 20% share in Citroen C3s made in Iran.
He said, “We have spent hours negotiating with Iranian parts makers so as to prepare the groundwork to increase the share of locally manufactured parts in Citroen cars made in Iran to 70% in the coming years.”
The official is of the opinion that there are top-notch auto parts makers in Iran which Citroen is assisting to help enhance their products’ quality.
So far, 45,000 hours of training courses have been held in Iran for the JV’s local technicians. Furthermore, 40 professionals from France and Sweden are actively present at SAIPA-Citroen production plant and monitor the activities of the factory.
Martin further noted that the recent volatility in the forex market has spurred SAIPA-Citroen to push ahead with plans to increase the share of locally manufactured parts in the JV’s products and curb its reliance on imported parts.
Since last December, the foreign exchange market has been in a state of upheaval as the US dollar exchange rate jumped to unprecedented levels several times before the government of President Hassan Rouhani stepped in and unified the rate at 42,000 rials last month to put an end to the raging market.
Presales on Track
SAIPA-Citroen initiated the presale of the Citroen C3 in Iran on Wednesday. The vehicle was offered through online sales website Iran e-Car, with buyers being charged 600 million rials ($14,285) as a down payment.
The JV is yet to announce the final price for the model. As per an official statement, the vehicles will be delivered in August and exclusively in Tehran. The statement also says the cars can be delivered in other major Iranian cities as well in the near future.
The C3 is a small hatchback equipped with a six-speed automatic gearbox and a 1.6-liter turbo four-cylinder engine with a 163hp output. It meets Euro 5 emission standards and was initially unveiled in 2002 in France.
The latest version of the car introduced in 2016 is sold in Iran. In addition to the Citroen badge, the vehicle offered in Iran will bear the SAIPA-Citroen badge in Persian.
Martin said, “SAIPA-Citroen is set to manufacture a B-class SUV in Iran in 2019 and a B-class sedan specially designed for the local market the following year.”
According to him, in order to address the needs of the Iranian market, a new engine model named EC5 will be designed in the country. The engine is to be used in production of the C3 in Iran.
Expansion Plans
The production site which used to be called SAIPA Kashan— located in central Isfahan Province—has been renamed to SAIPA-Citroen and is considered one the most modern production facilities in Iran and is equipped with the latest technologies available in the country.
According to Martin, the facility’s production capacity will be increased to 200,000 in the coming years.
In addition to the C3, several other models are manufactured at Kashan production plant, including the homegrown Saina and Tiba along with Changan C35 which is made in collaboration with the Chinese carmaker in Iran.
According to the data released by the Ministry of Industries, during the past fiscal, which ended in March, 138,969 cars were manufactured at the site.
Martin further noted that the JV plans to export Iran-made Citroen cars to other countries. He added that the quality of the products needs to be improved, “which is a hard goal yet attainable”.
Currently, a small number of Citroen C3s are produced in Iran on a daily basis but the JV plans to improve the production rate up to five units per hour.
As the C3’s production is gradually going into full swing, the company plans to phase out other models.
