IKCO-Renault Deal Clouded by Uncertainty

EghtesadOnline: Renault has been notified that it may continue its Iran operations only if it alters its policies, said a deputy minister of industries, mining and trade.

News ID: ۷۳۶۰۷۶

21 August 2016

Mohsen Salehinia also said in a press conference that Iran Khodro Company’s deal with Renault could be terminated, if the French company does not change its policies.

The ministry had earlier announced that any deal signed with foreign auto manufacturers should observe two major policies.

First, 30% of vehicles produced under the joint ventures should be exported through the foreign company’s sales networks.

Second, at least 20% of the required technology should be indigenized in the first phase of production.

According to earlier reports, these conditions had been observed in the IKCO-Renault deal. But the latest statement made by the official indicates concerns that Renault might not be holding its end of the bargain.

Financial Tribune reached out to Renault Pars for a comment in this regard.

“Renault is willing to comply with the framework laid out by the Ministry of Industries, Mining and Trade,” a company representative said on condition of anonymity.

“In line with the ministry’s policies, Renault has three top priorities in Iran: direct investment, transfer and localization of technologies and export of parts and car from Iran.”

Although IKCO’s joint venture with Renault has been sealed, SAIPA, Iran’s second largest auto manufacturer, has also been negotiating an agreement with the French company, according to Financial Tribune.

This decision has been criticized by several state officials and independent analysts who believe parallel agreements could potentially reduce competitiveness in the country’s auto industry.

This could also be another reason for the ministry’s dissatisfaction with Renault’s approach in Iran’s auto market.

But the termination of the deal is quite unlikely since on February 29, 2016, Salehinia announced that France’s Renault and SAIPA will soon finalize the contract’s framework.

Last week, Salehinia also commented on recent agreements between Iranian automakers and their foreign counterparts.

The official noted that the ministry has not imposed any limitations on negotiations carried out between local and foreign automakers.

“Neither have any limitations been put in place for local automakers of the private sector nor do we intend to push the negotiations in a particular direction,” he said.

“We have tried to devise a win-win policy and set clear goals for negotiations between Iranian and foreign automakers.”

He said Iran Khodro Company’s deal with Peugeot and SAIPA’s deal with Citroen have been finalized while negotiations with Renault are continuing.

According to the first phase of the agreement, Peugeot will renovate and complete its production line at IKCO so that the two companies can jointly produce new vehicles under the joint venture.

The first car to be produced under the JV is Peugeot’s 2008. Production will begin in January 2017 and the cars will be marketed in March. Other models such as the 301 will be produced later.

Salehinia added that the agreement between Iran Khodro Diesel and Mercedes-Benz will also be finalized soon.