All major international automakers have rushed to take the lion’s share of Iran’s auto market and Renault was no exception, after the western sanctions against Iran were lifted.
Throughout the years of sanctions, the French firm held its ground in Iran and stayed true to its contracts with its Iranian partner while most industrial allies of Iran departed.
With that said, a deal was expected between Renault and one of the major Iranian automakers soon after the removal of sanctions, but still no contract has emerged. Even the outline of Renault’s possible deal with Iran Khodro, the oldest and largest auto manufacturer of the country, has been clouded by uncertainty.
It seems that Renault is keen on signing parallel contracts with both IKCO and SAIPA, which is opposed by Iran’s Ministry of Industries, Mining and Trade. Some experts believe the ministry’s objection to dual deals is due to the failure of similar contracts in the past.
In fact, Renault has been working simultaneously with both SAIPA and IKCO over the years, but it seems that the ministry did not find the outcome of those collaborations satisfactory. Officials believe dual deals could give rise to conflict of interest. Subsequently, the ministry issued a directive obliging foreign companies to undertake a project with only one Iranian firm at a time.
“Considering the current state of affairs, Renault is not really keen on forging a new joint venture with Iranian companies,” CEO of Renault Pars and vice president of Renault of Africa, Middle East, Iran and India, Peyman Kargar, has been quoted as saying.
“Renault prefers to work with its partners in Iran. We want to continue our current cooperation within the Renault Pars framework with Iran Khodro and SAIPA, and we are also studying opportunities to define new additional cooperation frameworks.”
The company’s representative, however, noted that negotiations are continuing.
Renault Pars is an Iranian joint venture established in 2004 and owned by Renault and Iran’s Industrial Development Renovation Organization. The company is in charge of managing the assembly of completely knocked-down kits of Renault cars by local manufacturers IKCO and SAIPA. However, a significant portion of the auto parts is supplied locally (60% for Tondar, 34% for Tondar pickup and around 40% for Sandero and SanderoStepway models).
One of the other schemes that Renault might have in mind for continuing its presence in Iran is to purchase the shares of Iranian auto manufacturing companies. This would enable the company to play a more active role in managing the production of Renault models in Iran.
The French company might even be willing to go a step forward and establish a manufacturing site in Iran.
In the past, the multinational automobile manufacturer devised a new approach for developing countries. It introduced several models designed specifically to cater to those on small budgets.
However, the company’s last initiative to implement such a plan through Logan, locally known as L90 or Tondar, led to the production of a model that is currently sold at $11,000, which is three times the original estimated price. So, it would not be surprising to see Renault trying to gain control of the production and pricing this time, which is nigh impossible in the monopolized auto market of Iran.
The new development follows comments by Mohsen Salehinia, Iran’s deputy minister of industries, mining and trade, saying IKCO’s deal with Renault could be readjusted if the French company does not change its policies.
The ministry had earlier announced that any deal signed with foreign auto manufacturers should abide by two major policies: 30% of vehicles produced under the joint ventures should be exported through the foreign company’s sales networks and at least 40% of the required technology should be localized in the first phase of production.
“Renault is willing to comply with the framework laid out by the Ministry of Industries, Mining and Trade,” a company representative told Financial Tribune on condition of anonymity.
“In line with the ministry’s policies, Renault has three top priorities in Iran: direct investment, transfer and localization of technologies, and export of parts and car from Iran.”
