VW Returns After 17 Years

Volkswagen AG plans to sell cars in Iran for the first time in 17 years, taking advantage of the easing of sanctions to expand amid concerns about stalling growth in Europe and China.

The carmaker has signed a contract with local importer Mammut Khodro to offer Tiguan compact SUVs and the Passat family car, mainly at dealerships in the Tehran area, VW said in a statement.

Expanding into emerging economies is part of VW’s strategy to reduce its reliance on its main markets and add new sources of revenue, Bloomberg reported on Tuesday.

“By returning to Iran, the Volkswagen brand is filling another blank spot on the global automobile map,” Anders Sundt Jensen, the company’s project manager for Iran, said in the statement.

Volkswagen is the market leader in Europe and China, and is struggling to rebuild operations in the US after the diesel-cheating scandal. That leaves Iran, with a population of 80 million, as a rare opportunity for growth.

Companies from Boeing to Total SA are jostling for early entry into the Islamic Republic a year after international sanctions tied to its nuclear program were lifted.

PSA Group was the first carmaker to reenter with a deal announced last year to upgrade its Peugeot factory near Tehran and start building Citroen models in the country.

A few months later, Renault SA said it would set up a new plant with capacity to build 150,000 autos per year.

Iran's auto production growth will average 11% through 2021, Fitch Group’s BMI Research said in April.

The return of European carmakers to the Iran market will boost the sector, although remaining US sanctions will damp growth.

The German automaker’s push in Iran coincides with political tension intensifying in the Persian Gulf region, embroiling VW’s third-largest shareholder Qatar, which is facing an unprecedented boycott by four of its neighbors over alleged ties to extremists.

Iran and Turkey have stepped in to support Qatar.

European cars were popular in Iran before the 1979 revolution. VW sold the Beetle here in the 1950s and the Bulli van in the 1960s.