IDRO Fretting About Extended Delays in JV Auto Production

EghtesadOnline: Director of Iran Industrial Development and Renovation Organization says that before the end of the current fiscal (March 2018) no new deals will be signed between local carmakers and foreign companies.

News ID: ۷۴۴۲۲۷

29 October 2017

Over the past several months extending probably into two years, officials at Iran Khodro and SAIPA have routinely talked about “ongoing negotiations” with global automakers like KIA Motors and Nissan to build/assemble new models in Iran. But so far nothing of substance has emerged from the talks.

Mansour Moazemi says “Several major automotive contracts have been signed between Iranian carmakers and foreign firms. Until all of this come to fruition no new deals will be signed,” ISNA reported.

To help move the agreements forward and translate them into vehicles, IDRO has called on local carmakers to report on the current status of their agreements with foreign companies. IDOR is a government backed agency run by the Ministry of Industry and its chief is also deputy minister of industries. The organization holds some 20% share in key industrial companies including the key automotive sector — about 20% of IKCO and SAIPA’s public shares are owned by IDRO, according to Financial Tribune.

According to published reports three major automotive deals have been signed in the past two years but none has had any visible impact on the key auto industry and its affiliates in Iran.

Renault

IDRO itself signed a €660-million trilateral production deal with French carmaker Renault and a local private company Negin Khodro (aka Naseh Parto) in August. Reportedly, Renault is setting up production lines in the industrial city of Saveh, 100 km south of Tehran and has started talks with local spare part makers and suppliers.

As per the deal three models are to be produced, namely Kwid, Duster, and Symbol. Market observers name Kwid as Renault’s trump card in Iran’s saturated  auto sector. Originally created for the growing Indian market, the model has been  anticipated to take the lead due to its low cost --  estimated in the region of 300 to 350 million rials ($8,000 to $9,370).

The first Kwids are set to arrive in the local market by late 2018.

Peugeot, Citroën

IKCO and Groupe PSA’s Peugeot brand signed a €400-million deal in June 2016. Through the 50-50 joint venture, named Iran Khodro Automobiles Peugeot (IKAP), three models, namely Peugeot 208, 2008 SUV and 301 compact, are to be manufactured in Iran. So far only four units of Peugeot 2008 have been assembled in Iran to the chagrin of car buyers and market observers.

The model is priced at a whooping 1.04 billion rials ($26,000), almost $9,000 over and above the price in international markets. Following its strange policy decisions and business practices, IKCO started the presale of Peugeot 2008 months ago. An estimated 5,000 people registered to buy the car and paid a deposit of 600 million rials ($15,000) each. IKCO promised to deliver the vehicle by September, but so far the company has hardly delivered 50 units that were imported as completely-built up kits.

Last week IDRO’s Moazemi met with Executive Vice-President of Groupe PSA (Peugeot-Citroën) for Africa and the Middle East Jean-Christophe Quémard in Tehran. When Quémard was asked about the deal’s status, he said “Lack of investments for purchasing and importing auto parts is impeding Peugeot operations in the country.” He did not elaborate.

Later, in a talk with the Financial Tribune’s sister newspaper Donya-e-Eqtesad, Quémard concurred that “Peugeot auto parts required for production are stuck in the customs. This is not an uncommon incident in the global industry. The problem will be solved soon.”

Groupe PSA also has a joint production agreement with SAIPA through its Citroen brand. Unveiled in July 2016, the deal obliges the Paris-based carmaker to invest €300 million over five years for the development and production of three Citroen models. Save for an unimpressive sign put up in front of SAIPA’s Kashan production plant that reads “SAIPA Citroen Company” nothing else has happened so far!