Peugeot Buying Opel is Good for Iran

PSA Group’s announcement this week that they are looking to purchase the Opel/Vauxhall brands from General Motors is hardly surprising to many who know the European car market and its flagging sales pattern. But for the Iranian market, which still has limited exposure to European brands, it could mean an entirely new firm entering with force.  

As part of the 2016 joint venture signed between Iran Khodro Company (IKCO) and PSA’s Peugeot, the French firm invested €400 million ($436 million at the time) in the venture called IKAP. PSA later signed another deal with SAIPA to produce Citroen-branded vehicles, including the Citroen C4 sedan due for launch in April.

Now with the GM selloff of German-based Opel and British-based Vauxhall, PSA would apparently be given the second combined largest market share in Europe.

Currently imports of Opel models to Iran is through a third-party known as Tavan Khodro Jey, which imports  limited numbers of Opels like Corsa and Astra models.

While Opel/Vauxhall’s price tag could exceed €2 billion, according to analysts at Macquarie Research, the purchase would instantly boost PSA’s deliveries in Europe by about 68% to an annual 2.5 million vehicles. It would also open the Iranian market fully to the Opel/Vauxhall brands that have not been sufficiently marketed due to the current limitations of its importer.

Also not being owned by a Detroit-based company is likely to make the brand’s entry into the country all the more meaningful if not easier.

 Bringing Opel Production to Iran

The buyout offers Iran Khodro and SAIPA a chance to upgrade their technology as part of a wider sell-off of no longer required machinery at plants across Europe.

It will be inevitable, once the deal gets past the regulators, that PSA will look to shut down some of their excess facilities.

Sites like the UK’s Ellesmere Port near Liverpool, which has produced the Astra model for more than 30 years, could, due to possible Brexit costs, lose its position as part of the wider cost-cutting exercise.

If the Iranian producers play their cards right, they could bring some of these possibly disused production lines to Iran and produce the Astra in the local market with local auto part makers benefitting from the deal.

Moreover, joint production deals like the ones signed in 2012 between Opel and Peugeot on models like the Crossland X SUV, which will be produced in the same factory as the Citroen C3 in Spain, offer several verticals of cost reduction for the brands.

CEOs of the PSA did not comment on the impending deal at a recent auto conference in Tehran as the news appeared in the final hours of the conference and the  auto show that followed.

Whether or not Iranian carmakers get a slice of the Opel/Vauxhall is too early to contemplate, but with Peugeot’s continuing push into the local market by 2018-2019 we could see the Adams, Corsas and Astras all being produced here at more affordable prices.