Economy, Auto

Foreign Carmakers Coming

Foreign Carmakers ComingForeign Carmakers Coming

Contracts with foreign automakers will gradually enter the execution phase in a month, a deputy industries minister has announced.

Mohsen Salehinia also described the latest status of the new deals signed with foreign automakers as well as the government’s supervisory policy, Mehr News Agency reported.

“Vehicle contracts are not excluded from other industrial sectors and extensive negotiations have been held to provide optimized conditions in final agreements,” he said.

“Talks between Iranian and foreign vehicle producers are in final stages with those who made progress before the removal of sanctions having the lead.”

Salehinia predicted that the deals will become operational in the next 30 days.

“Based on the agreements, joint production will take place and the vehicles will be released in the domestic and regional markets, which require the complete removal of all international sanctions against Ian,” he said.

“In the new contracts, the drafts of which have been defined for cooperation with foreign automakers, a number of crucial points have been taken into consideration, which pertain to the country’s situation and the grounds for the presence of foreign vehicles.”

The deputy minister said the provisions of agreements include the establishment of joint firms, formation of new brands, technology transfer, cooperation in spare parts production, export of a portion of the products to third-party countries and collaboration in increasing quality, in addition to diversification on the basis of customers’ demands, training and education.

Salehinia noted that the lifting of sanctions has eased money transfer and eased the financial situation for Iranian automakers by enabling them to conduct joint production with their foreign counterparts.

 Renault Reentry

Renault SA Chief Executive Officer Carlos Ghosn said his company plans to reenter the Iranian market.

The CEO said Renault, Europe’s third-biggest carmaker, plans a “much more massive” presence in Iran, with a wider range of local partners, when the company returns to the country now that trade sanctions have been eased.

“Renault will commit to investments once an international legal framework for restoring business ties is in place,” Ghosn said.

“We’re waiting for the light to go from orange to green.”

The carmaker halted business in Iran three years ago to comply with trade sanctions, resulting in a €514-million ($560 million) provision that hurt earnings. French competitor PSA Peugeot Citroen said last year that it was struggling to reach an agreement for a possible return to Iran because of resentment following its departure in 2012.

 Kia Sales Target at 20,000 Units

Kia Motors, South Korea’s second-largest carmaker, has set its sales target in Iran at around 20,000 units for this year, as it seeks to fully resume exports after years of suspension due to UN-led international sanctions, industry sources said on Friday.

Kia’s sales target in Iran was set “internally”, the sources told the English division of Yonhap News Agency.

Company officials did not confirm the figure, nor did they elaborate on when the company will resume exports to Iran in full swing, except to say that it will decide on the matter by closely watching market situations.

Hyundai Motor, its sister company and the biggest South Korean carmaker, declined to provide a sales target for the Middle East country.

In 2011, just before the sanctions were imposed on Iran, Kia Motors sold 5,185 units there, while Hyundai Motor sold 6,726 units.

 DS to Mark Territory

PSA Peugeot-Citroen’s standalone premium brand, DS, is targeting sales in Iran and plans to open a store in Tehran “in the next few days”, according to DS CEO Yves Bonnefont.

Bonnefont told Just-Auto in Paris that he sees a great opportunity for DS in Iran because a number of Iranian customers are attracted to the French style.

“We believe this is a significant segment in Iran,” he said. “We are very happy that we could be the first premium brand to be back on the market”.

Bonnefont also emphasized the importance of China to the DS brand’s development.

“We are building the brand with two pillars: one is Europe, the other is China. And then we have set our international development plan around the top 200 cities in the world. We are very systematic in opening DS stores in those cities.”

However, Bonnefont also said that he does not want to move “too fast”.

“I don’t want us to be stretched. We should concentrate on our core markets, establish the brand–and we know that takes some time–and then do things progressively. Iran is a great opportunity, we catch the opportunity and we will see how it works out. We are full of hope,” he said.

 Audi’s Proposition

Audi is officially gauging its first-ever entry into the Iranian auto market where the German firm sees “growing potential” for luxury cars after world powers lifted international sanctions on Jan. 16, according to a new report on the company’s movements.

German companies will be able to export goods worth €10 billion ($10.9 billion), as Iran is opening up after years of economic isolation, Germany’s DIHK Chamber of Commerce and Industry said.

Representatives of the Volkswagen-owned brand are currently in Iran for talks with possible importers to examine the prospects for business, a spokeswoman at Ingolstadt-based Audi said on Monday, without being more specific on which brand they are discussing.

“There is growing potential for luxury cars,” she said, noting that Audi has never before done business in Iran.

Audi had not yet emerged as an upmarket luxury brand in Iran when it was shut off from international markets following the Islamic Revolution in 1979.

Ramak Khodro, a local auto dealer, has repeatedly announced that it has an unofficial contract with the German group, which has been rejected by Audi to this newspaper.

The German company clarified its position last December by saying, “Audi AG has not granted any real or juridical Iranian or foreign person the authorization to import its products.”

 The Data

Almost 85% of vehicles sold in Iran are priced below 500 million rials ($16,650) and 99% are priced below 2 billion rials ($66,000). It is, therefore, important to ensure price competitiveness to make inroads into the volume game.

New vehicle segments primarily aimed at the young, urban, middle class population are expected to evolve in the under $25,000 price range.

Industry data showed that 1.13 million cars were sold in Iran in 2014.

 Analysts say the market is improving, raising hopes that it could expand further from a years-long slump caused by the international economic sanctions.