Domestic Economy

PSA-SAIPA Deal for Citroen Production in Iran

PSA-SAIPA Deal for  Citroen Production in Iran PSA-SAIPA Deal for  Citroen Production in Iran

French carmaker PSA Group has signed a framework deal with Iranian counterpart SAIPA to produce and sell Citroen vehicles in the country.

The deal, which was unveiled on Thursday, obliges the Paris-based carmaker to invest €300 million ($330 million) over the next five years for the development and production of three Citroen models, which will be sold throughout the country via a network dedicated exclusively to the brand, through a new joint venture, Reuters reported.

It will cover the entire value chain, from the design stage right through to vehicle marketing. Manufacturing will take place at the Kashan plant in Iran, which will be 50% owned by PSA Group. The agreement will be backed up by technology transfers and a significant level of local content.

PSA, formerly known as PSA Peugeot Citroën from 1991 to 2016, pulled out of Iran in 2011 under US pressure. It now faces stiffer competition from Chinese rivals that have grabbed more business in the intervening years, as well as western peers such as Renault flocking back with newer models.

"This agreement opens up a new chapter in our history of cooperation with SAIPA," PSA Chief Executive Carlos Tavares said. "Our aim is to provide our Iranian customers with modern vehicles that meet the highest comfort, safety and technology standards."

Iranian car registrations approached 1.6 million cars at their 2011 peak, with PSA claiming almost 30% of the market, before collapsing under the weight of sanctions.

The deal with SAIPA, Citroen's partner since 1966, is the French carmaker's second Iranian manufacturing deal since 2011 and follows a €400-million joint venture deal inked last month between Peugeot and state-owned Iran Khodro.

The first cars produced under this venture are set to hit Iranian roads in February 2017, with a target of producing 200,000 vehicles a year by 2018. The 50-50 joint venture will manufacture three models—the Peugeot 208, the 2008 sport utility vehicle and 301 compact—using parts mostly made in Iran.

According to Iran Khodro CEO Hashem Yekezare, 30% of the cars produced will be exported to the Middle East and beyond.

PSA's smaller DS premium badge has also clinched a distribution agreement in the country.

Under the agreement, to be finalized by the end of 2016, Citroen and its Iranian partner will introduce the first of three planned new models for the French brand in 2018.

With its three world-renowned brands, Peugeot, Citroën and DS, the PSA Group sold 3 million vehicles worldwide in 2015. Second largest carmaker in Europe, the PSA Group recorded sales and revenue of €54 billion in 2015. The group confirms its position of European leader in terms of carbon dioxide emissions, with an average of 104.4 grams of carbon dioxide/km in 2015.

With a fleet of 1.8 million connected vehicles on the road worldwide, the group is on the cutting edge of innovation in this field and is expanding its services as a mobility provider. It is also involved in financing activities and automotive equipment.

Founded in 1966, SAIPA is the second-largest car manufacturer in the Middle East and North Africa region and one of the 20 largest automakers worldwide. With a 40% market share in Iran, the company exports its products to 21 countries, leveraging manufacturing facilities across the four continents.