Domestic Economy

Foreign Car Companies to Face New Terms

Foreign Car Companies  to Face New Terms Foreign Car Companies  to Face New Terms

Iran's car industry has been turning the strong interest shown by foreign companies to its advantage by setting tougher conditions in any cooperation agreement.

Iran Khodro (IKCO), the country's largest manufacturer of cars, has quite successfully convinced its partner, in this case PSA Peugeot Citroen, to agree to such tighter conditions in a joint venture.

Iran Khodro CEO Hashem Yekeh Zareh stated that "we are not going to work with foreign firms in the way we used to do." He pointed out that "mutual investment is the prime condition to cooperation with foreign companies," in a sign that IKCO wants explicit transfers of technologies, physical capital and know-how to Iran.

On Saturday, Iran Khodro started production of a new Peugeot model during a special ceremony in Tehran, IRNA reported. During the ceremony, Zareh stated that both domestic factors and the international sanctions have caused Peugeot to stop producing cars in Iran.

"One can say that only 30 percent of the problems [with Peugeot] were caused by the sanctions while the remaining 70 percent was caused by domestic issues," he said as he inaugurated the production line for a new model of Peugeot 206.  

Iran's car-making industry has been battered for over a year by international sanctions imposed by the West amid a dispute over Tehran's nuclear energy program. In 2011, Iran was Peugeot's largest market after France, accounting for more than 13 percent of the firm's global deliveries.

Spooked by international sanctions, Peugeot left Iran in spring 2012. It sold 458,000 vehicles in the country in 2011.

Last April, the CEO of French carmaker PSA Peugeot Citroen held talks in Tehran with his Iranian joint venture partner to consider returning to the country.

"Fulfillment of the previous commitments, transferring the technical know-how, mutual production of cars as well as selling Iran Khodro's vehicles through the French exporting network were discussed and reviewed during the meeting," Zareh said at the time.

In November, Iran and the P5+1 group of major world powers reached an interim deal in Geneva in which Tehran agreed to partly roll back its nuclear activities in exchange for limited sanctions relief. Under the deal, the car industry would be exempt from any sanctions.

Since sanctions were eased, PSA Peugeot-Citroen has been very eager to re-enter the Iranian market.  A new contract between Iran Khodro and Peugeot stipulates the creation of a joint venture in which the companies hold equal shares.

Renault, the other leading French automobile company, has also signed contracts with IKCO to start production of its popular Clio4 and Captur models.