Economy, Business And Markets

Renault Signs Deal for Iran Venture

Renault Signs Deal  for Iran Venture Renault Signs Deal  for Iran Venture
Peugeot plans to produce 150,000 vehicles this year and wants to double that in 2017

Renault has reached a deal with Iran's government to open a plant for making at least 150,000 vehicles a year, as European companies race for a share of Iran's market now that international sanctions have been lifted.

The French carmaker announced the deal with the Industrial Development & Renovation Organization of Iran on Friday during the Paris Auto Show, AP reported.

The plant in a Tehran suburb will produce Duster and Symbol cars starting in 2018. Renault will be majority shareholder and have its own distribution network in Iran for the first time, according to a company statement. Financial details were not released.

Renault-Nissan CEO Carlos Ghosn said Iran could have demand for 2 million cars in 2020, making it a market with "undeniable potential."

"The Iranian government wants to attract foreign investment in the Iranian car industry to bring competitive new products benefiting Iranian customers with respect to standard, quality and safety," Iran's Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh said in the statement.

He said Renault was chosen because it has been in the country for 12 years, though activities were frozen while Iran was under sanctions over its nuclear program.

The deal is in addition to a joint venture between Renault and Iran signed earlier this year to revive production at a plant where Renault's activities had been suspended.

> Peugeot to Sell 150,000 Vehicles in H1

Renault's crosstown rival PSA Peugeot-Citroen was especially active in Iran before the sanctions and has also revived activities this year.

The Iranian minister visited the Peugeot-Citroen stand at the Paris Auto Show and CEO Carlos Tavares said the company will produce 150,000 vehicles this year and wants to double that in 2017.

Peugeot, the biggest-selling European automaker in pre-sanctions Iran, suspended sales in 2012 when an international boycott due to Iran's nuclear program was extended to cars.

The French carmaker's sales peaked at 458,000 vehicles before its withdrawal, nearly 30% of the Iranian market, but it now faces stiff competition from Chinese carmakers that have grabbed more business during the sanction years, as well as from western rivals such as Renault, which are also flocking back with newer models.

The Paris-based carmaker in July struck a framework deal with Iranian counterpart SAIPA to invest €300 million ($337 million) in the development and production of three Citroen models through a new joint venture.

The deal with SAIPA, Citroen's partner since 1966, follows a joint venture deal signed in June between French peer Peugeot and state-owned Iran Khodro. PSA's smaller DS premium badge has also clinched a distribution agreement in the country.

Iran's automobile industry builds some 900,000 vehicles a year, though authorities hope to build 3 million annually by 2025. Over 90% of market share are controlled by two local companies: Iran Khodro, which assembles Peugeot-branded vehicles from kits, and SAIPA, which has made Citroens and Kias. Both manufacturers also build Renaults.

Since Iran reached a landmark deal with international powers to limit its nuclear program in exchange for sanctions relief, analysts have predicted the auto industry would grow if Iran's economy improves.