Peugeot-Citroën Pledges to Help Iran Auto Industry Grow

EghtesadOnline: Executive vice president of Groupe PSA (Peugeot-Citroën) for Africa and the Middle East says the French automotive conglomerate has plans to help Iranian companies transform into capable auto manufacturers.

News ID: ۷۴۴۲۵۵

31 October 2017

In an interview with ‘Tejarat Farda’ Jean-Christophe Quémard said, “Technology transfer to Iran and localization are on top of Groupe PSA’s agenda.”

“As per the joint venture agreement with Iran Khodro, we will assist the company to develop into a capable producer of cars,” he told the Persian-language weekly in Paris.

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 and 301, are to be manufactured in Iran, according to Financial Tribune.

IKCO is Iran’s largest automaker with an estimated 53% share of the market. However, most cars produced by the semi-state-owned company are of poor quality and have engines that are no more used in countries with stringent environmental regulations. Almost all vehicles made by this company are notorious for high emission, poor mileage and flaunting safety rules, especially the low-priced sedans.

The company is also often criticized by critics and government officials for merely being an auto assembler because imported parts — including engines and gearboxes — have a huge share in IKCO products.

Quémard says that the French automotive giant is in talks with Iranian suppliers and will start shipping auto production machinery to Iran. Enabling local businesses, technicians and workers to use modern technology depends on training, a process that according to the Frenchman is time-consuming. “But we are determined to succeed in this matter.”

He says “Local auto parts manufacturers will be linked to Peugeot.” Supposedly, this can and should enable local businesses to export their products to foreign markets through Groupe PSA’s global sales network.

According to Quémard, Iran is to become Groupe PSA’s production hub in the MENA region, “a goal the fulfillment of which depends on technology transfer and increasing the share of local auto parts makers in the deals.”

Mounting US Pressure

In face of mounting pressure on Tehran from mercurial US President Donald Trump, market observers and economic experts often question the fate of major agreements signed by foreign auto companies with Iranian firms after the historic 2015 nuclear deal.

Quémard prefers not to play with words or indulge in ambiguity. “Groupe PSA is committed to its Iran contract. The company has started direct investment in the country, something that it has never done before,” the journal quoted him as saying.

He said so far “Groupe PSA has invested €200 million in its Iran operations.”

The auto conglomerate has a long history of presence in Iran. Vehicles under Peugeot brand were produced in collaboration with IKCO before the sanctions were tightened in 2011, which forced the company to reduce its ties to the bare minimum.

The senior PSA official says “Groupe PSA is not a political entity and we do not adopt a political stance. Groupe PSA respects international regulations with regard to its presence in Iran. The status quo has not changed and we will continue our operations in Iran.”

He noted that French President Emmanuel Macron, European leaders and the EU have reiterated their strong support for the nuclear deal signed by the six world powers and Iran. “There is nothing to worry about. There is no hurdle in the way of Groupe PSA plans related to Iran.”

Market Share, Exports

Quémard says, “Through the Peugeot-IKCO deal Groupe PSA seeks 20% share of Iran’s market. The Citroën-SAIPA joint venture also targets 10% share.”

In addition to IKAP, Groupe PSA has a joint production agreement with SAIPA through its Citroen brand. Unveiled in July 2016, the deal says the Paris-based carmaker should invest €300 million over five years for the production of three Citroen models.

As per the deals Peugeot and Citroën have committed to export 30% of locally manufactured vehicles and auto parts through their global sales network.

According to Quémard, the Iran-made cars and auto parts will be exported to Iraq, Azerbaijan, Russia, and Africa.

Delayed Delivery

The first locally assembled IKAP car to arrive in Iran is the Peugeot 2008. It is priced at 1.04 billion rials ($26,000) -- almost $9,000 over and above the price in international markets.

Due to high local market demand, Peugeot has been compelled to launch the production lines for this model with some haste. Since local suppliers were unable to provide the company with the required parts that have resulted in long delays in delivering the cars, the French firm started production with imported parts.

Visibly anxious about his company’s credibility due to the extended delays in the production and delivery of cars and the bloated bureaucracy in Tehran, Quémard says, “Peugeot auto parts are stuck in the customs. This is not an uncommon incident in the global industry. The problem will be solved soon. But for the time being, the problem has hampered Peugeot operations in Iran.”

In addition to Peugeot and Citroën, several other carmakers are part of Groupe PSA and the conglomerate’s DS Automobiles and Opel brands are also present in Iran through imports.