Peugeot reported to form JV with Iran Khodro

/By AzerNews/

By Sara Rajabova

Iran’s auto industry, which is seen as the country’s biggest non-oil sector, is one of the most appealing sectors for foreign investments, should financial sanctions on the Islamic Republic be lifted.

The European car-makers are striving to resume their activity in Iran as soon as all sanctions are removed. French companies which were forced to leave Iran’s huge market in 2012 amid Western sanctions have said to be willing to return the country, once a final nuclear deal is inked.

Iranian media reported that French giant automaker Peugeot will form a joint venture with the country's leading car manufacturer, Iran Khodro.

The Persian-language Iran newspaper said on May 12 that final talks over the JV have been held in Paris, adding the two sides are expected to sign a deal to the same effect “within the next few weeks”.

The newspaper added that each side will have a share of 50 percent in the venture.

In July 2014, Iran’s leading auto manufacturer, Iran Khodro Company (IKCO), announced plans to cooperate with French automakers, Renault and PSA Peugeot Citroen, to produce four new vehicles in Iran.

The report further read that Peugeot will be committed under the deal with Iran Khodro to provide investments, technical know-how, new products and all related assembly lines.

Iran Khodro in return will be committed to provide after sales services, sales networks as well as its own share of the assembly lines.

The report went on to note that this is the first time that a foreign company is investing in Iran's auto sector with such a huge share of investments.

It further added that Citroen, another French automaker which is part of Peugeot, is in talks over a similar partnership with their old Iranian partner – Saipa.

However, no details on the talks have emerged in the media yet but Iran said it is expected that talks between Saipa and Citroen will be finalized within the next three months.

Many in Tehran have called for efforts to bring in foreign investments in the country’s lucrative auto industry.

However, economists say Iran needs to force a shift in attitude of the investors with regards to their plans for the country’s auto sector.

Economist Jamshid Pazhouian told the Persian-language newspaper Etemad that Iran's auto sector is attractive to foreign investor. He however noted that they are more interested in selling cars to Iran rather than producing cars in Iran.

Another economist, Jamshid Edalatian Shahriari stressed that Iran needs to take certain measures to engage Europeans in its industrial production projects.

The automobile industry accounts for nearly 10 percent of the country’s gross domestic product. Latest data show that Iran ranks 18th on the list of the world’s top auto manufacturers.

Iran Khodro and Saipa companies account for more than 90 percent of the total domestic production in Iran. Other figures show the country also relies heavily on imports. Iran imported 102,000 cars during the last Persian calendar year (ended March 20, 2015,) showing a 31 percent year-on-year increase.

Iran has recently been witnessing an increase in the number of major trade delegations – mostly from Europe – that visit the country to explore avenues for investments in the country in the post-sanctions era. This has already raised speculations about which specific market looks more attractive to investors and also how Iran would benefit best from the return of investors.