Renault Concludes €660m Deal in Iran

French carmaker Renault has signed the long-awaited trilateral production deal with Industrial Development and Renovation Organization of Iran and a local private company Negin Khodro (aka Naseh Parto) in Tehran on Monday.

Renault holds the majority 60% share of the new joint venture, while Negin Khodro and IDRO each take 20%.

Negin Khodro has so far been Renault’s import arm in Iran, but following the deal, the company will take a share in local auto production as well.

IDRO Director Mansour Moazzemi, Renault's Executive Vice President Thierry Bollore and Negin Khodro CEO Kourosh Morshed Solouk signed the deal at the Ministry of Industries, Mining, and Trade.

During the event, Bollore said Renault does not consider Iran a mere sales market. He added that Iran is one of the most important strategic partners of Renault.

#Breaking Renault, IDRO Finalize Deal to Produce 300,000 Cars in #Iran #IranDeal pic.twitter.com/VWDnOua5yS

— Financial Tribune (@Fintribune) August 7, 2017

Moazzemi announced that “€660 million will be invested in the joint production and 150,000 people will be employed," Financial Tribune reported.

In addition to IDRO and Renault officials, Industries Minister Mohammad Reza Nematzadeh was present at the event. 

Payman Kargar, former Renault Iran Director and current chairman of the Middle East and India region of Nissan Group, also attended the signing ceremony.

Models and Production Plant

Saveh, an industrial city 100 km south of Tehran, will be the new home of Renault vehicles. 

The new facility will initially produce 150,000 units this year and then an annual average of up to 300,000 vehicles, according to officials at the press conference. 

Moazzemi said the first joint venture car between IDRO and the French automaker will be manufactured in 2018 at this site.

Based on the deal, Renault's Kwid will be produced in Iran after much speculation. 

The Kwid was originally created for the growing Indian market, but Renault executives began hinting at its likely entry to Iran last year. 

Initially launched in India in 2015, the model has been hotly anticipated in the car community due to its low cost, which has been estimated to be in the region of 300 to 350 million rials ($8,000 to $9,370).

Other models, including the Duster and Symbol, will also be produced at the site, the officials said. Duster and Symbol are already available in the Iranian markets via imports. 

Local Auto Parts Makers

Local auto parts makers will also be involved in the new Renault deal, with 15 firms already signing up to join the production venture. As sales ramp up, an additional 45 companies will join the project. 

Auto parts were rumored to be the sticking points, as the French carmaker was previously reluctant to deal with local parts makers. 

According to Bollore, Renault will set up an "academy" for training staff and engineers as per the latest production deal. 

The initial memorandum of understanding was signed between Renault and IDRO in September 2016 in Paris. 

Renault has had a bumper year in the Iranian market, as the Industries Ministry's statistics showed, by producing 42,686 cars in Iran in the first four months of the current fiscal (started March 21), with the French brand claiming a 10.4% share of the local auto market.

Following the new joint venture, Renault is set to expand its market in Iran. However, it is far behind Peugeot that had a 32.4% share of the domestic car market during the period. 

Iran Khodro (Peugeot’s local partner) produces three Peugeot models, namely 206, 405 and 2008.

Overall, Peugeot manufactured 133,286 units of the three models that had a 63.5% share of IKCO’s total output.