Economy, Business And Markets

Peugeot Returns

Peugeot Returns Peugeot Returns

The French carmaker Peugeot is once again in a joint venture with Iran's biggest carmaker 'to help Iran revolutionize its auto industry', Hashem Yekeh-Zareh, the managing director of Iran Khodro Industrial Group, IKCO, told MNA on Saturday.

The agreement came after intense negotiations between IKCO and PSA Peugeot-Citroen to produce Peugeot 301 and the mini crossover Peugeot 2008 as part of the mutual cooperation.

Under the new joint deals, the ministry of industry, mine and trade wants 40% of production to take place in Iran in the initial phases. The number could increase to 85% after five years. Iran's industry minister, Mohammadreza Nematzadeh, said Monday that the country aims to reach a total production figure of three million cars by 2020.

The US added sanctions on the Iranian auto industry in 2013 over Tehran's nuclear energy program. But these restrictions were eased under an interim deal that was signed in November 2013 between Iran and the P5+1 and was extended two weeks ago for another seven months.

Renault was also forced in July 2013 to halt completely-knocked-down (CKD) shipments to Iran. Following the withdrawal from Iran's market, the French company reported a huge fall in profits for the first half of 2013, suffering a loss of $680 million after halting its activities in the Islamic Republic.

Now, two years after the French automakers' activities in Iran were halted, the cooperation is a starter for a joint venture with equal shares for both sides. Back in 2011, Iran was Peugeot's second largest market by volume where one in four cars carry the Lion brand.

Last week, during an auto industry conference and exhibition in Tehran, Jean Christophe Quemard, PSA's operations director for the Middle East, said his company had a strong will to create a joint venture covering the entire automotive chain as soon as possible.

The recent decision to form a new joint venture between Peugeot and its former partner, Iran Khodro, seems to be the result of discussions that began at the Paris Auto Show in October.

>>>Germans Come to Help

The IKCO says the French group from PSA will arrive in Tehran within the next two weeks, adding that German car designers are also coming to Iran in the upcoming months to help the country improve its infrastructures in designing car platforms.

"We have come to an agreement with a veteran German car designer with decades of experience with Mercedes and Volkswagen," said Yekeh-Zareh. The German designer is supposed to come to Tehran with his team to educate the Iranian engineers and plan for future productions of IKCO. Platform design, engine design, electronic systems, suspension system, and interior design are on agenda of talks with the German team, IKCO chief said.

The potential for improvement of foreign relations between Iran and the west over the short-to-medium term has generated considerable interest from carmakers.

The months-long negotiations with European carmakers, which started after Iran and the five permanent members of the United Nations Security Council plus Germany reached an interim deal in November last year, are not the only area of cooperation between Iran and foreign countries.

Apart from the Chinese carmakers, which have never been accepted as reliable long-term partners in Iran's car market, American carmakers are also keen to enter Iran's market, according to latest reports.

During the 2nd Iranian Auto Industry International Conference (IAIIC), protracted negotiations were held between the representative of an American carmaker and an Iranian carmaker. The American party, whose activities mainly revolve around production of electric vehicles (EVs), has apparently held good talks with its Iranian counterpart, reaching an initial agreement, reported ISNA, without revealing the names of the American company and the Iranian carmaker or any other details.   

Based on the report, the American representative has expressed willingness to enter the Iranian market in a bid to transfer technology, invest in various projects and joint production as soon as the anti-Iran sanctions are officially lifted.

>>>Incentives for Hybrids

The ministry of industry, mine and trade recently sent a package to the cabinet to be approved based on which the manufacturers and owners of electric and hybrid cars would be given special incentives.

The administration is planning to reduce pollution, especially in big cities, and has approved a zero percent tariff for imported electric and hybrid cars, said Mohammadreza Nematzadeh back in November.

Currently, the country is investing to domestically produce Lithium batteries, as the essential element of electric vehicles (EVs) as the EVs are expected to be mass produced throughout the next Iranian calendar year (starting March 21, 2015).

The automotive sector is Iran's second largest industry after oil and gas, accounting for 10% of the country's GDP. Iran produced a total of 630,639 cars in 2013, which shows a 25.6% decline compared to 2012 largely due to the sanctions.

Despite the growing market in Iran and the great achievements in production volume, the consumers in the country complain about the quality. The emission and safety standards are still far away from global auto industry benchmarks.

A new model, when introduced by a domestic carmaker, is produced for years with the same appearance and technical specifications and this is the area where the leading car manufacturers in the world can help Iran.

According to many experts in the field, the auto industry could best flourish only if it is not controlled by the government and the private sector is given a stronger role in the sector's policymaking procedures.