Economy, Business And Markets

Peugeot Deal Makes Iran a Regional Hub

Peugeot Deal Makes  Iran a Regional HubPeugeot Deal Makes  Iran a Regional Hub

Based on a new joint venture contract signed by Iran Khodro Industrial Group (IKCO) and the French giant carmaker Peugeot, the European side is required to export 30% of the jointly manufactured products, Mehr news agency reported on Sunday.  

"The terms and conditions of the contract are not comparable with any of the previously signed agreements with Peugeot," said IKCO managing director, Hashem Yekke-Zare, anticipating that the new deal will help Iran become a major car exporting hub in the region.

“The IKCO is authorized to stop selling the joint products in the domestic market if Peugeot fails to meet its obligations regarding the cars’ export,” said the IKCO head.

The IKCO cooperation with the French carmaker dates back to 1995. Peugeot’s income from Iran’s market reached around 1 billion euros after only a decade. In 2009, IKCO was exporting Peugeot 206, Peugeot Pars, Peugeot 405, and Peugeot Roa sedans to Azerbaijan, Iraq, Armenia, Uzbekistan, Turkmenistan, Syria and Afghanistan. But as the western economic sanctions against Iran imposed over its nuclear energy program were tightened, the PSA Peugeot Citroen suspended sales of car assembly kits to Iran in February 2012.

Prior to 2012, IKCO’s import of auto parts from Peugeot accounted for 700-800 million euros ($572–654 million) per year. But after the French auto manufacturer unilaterally cut ties with its Iranian partner, the IKCO gradually reached 98% self-sufficiency in producing auto parts for Peugeot 405 and 75% for Peugeot 206.

Auto market experts say the losses incurred by the IKCO because of Peugeot’s decision to cut ties with its Iranian partner exceed 800 million euros. The parliament’s assessment of the issue indicates that the domestic sales of Peugeot cars fell by 68% following the French company’s withdrawal from Iran’s market, reaching 145,000 cars per year. But the IKCO head says the losses could be compensated through the concessions offered by Peugeot in the new contract.

This is while some experts also believe the new contract is more beneficial to Peugeot as not only it allows the company to manufacture joint products in Iran, but also gives it an opportunity to export some of the products to regional markets.

Following the interim nuclear deal between Iran and the P 5+1 group (the five permanent members of the United Nations Security Council plus Germany) in 2013, many American and European carmakers have expressed willingness to either invest in Iran’s auto industry or re-enter the market.

According to officials, initial agreements have been reached with some auto companies, while they have postponed the deals until the July 1 deadline for reaching a final agreement between Iran and the P5+1. As part of these agreements, Iran is seeking to facilitate the transfer of technology and know-how from advanced auto manufacturing companies to the country’s auto sector.

Meanwhile, the news of the deal between IKCO and Peugeot led to increased activities in the stock market and the prices of auto companies’ shares experienced relative increase, boursepress news agency reported.