Renault to Stay in Iran

EghtesadOnline: In the face of mounting pressure from the hawkish US President Donald Trump on international firms to ditch their Iran operations, Renault CEO Carlos Ghosn says the company is committed to maintaining its presence in the country.

News ID: ۷۴۵۴۶۷

18 June 2018

At Renault’s annual shareholders’ meeting in Paris on Friday, Ghosn said while taking measures to mitigate the risk of penalties for breaching renewed US sanctions, Renault will continue its activities in Iran.

During the session, the automotive giant’s chief said, “We will not abandon it, even if we have to downsize very strongly,” AFP reported.

Renault signed a €660-million trilateral production deal with Industrial Development and Renovation Organization of Iran and the local private company Negin Khodro last August. Three Renault models, namely Kwid, Duster and Symbol are to be produced in Iran under the deal, Financial Tribune reported.

Earlier in May, the belligerent US president announced the country’s withdrawal from the historic nuclear deal saying that new sanctions are to be reimposed against Tehran.

Under the weight of the truculent US administration’s pressure campaign, many international firms caved in. One of the companies which has suspended its operations in Iran was French carmaker PSA Group (producer of the Peugeot and Citroen brands), but according to Ghosn, Renault has opted to chart a different course.

Optimistic Outlook

Setting sights on the vast capacity of the Iranian auto market, Renault has mapped out a long-term strategy for staying in Iran. Furthermore, officials with the French automotive giant are of the opinion that the current situation is not permanent.

Ghosn says, “When the market reopens, the fact of having stayed will certainly give us an advantage … We have a future in Iran.”

Earlier during an interview in October 2017 when Ghosn was questioned about the possible challenges to Renault’s planned multi-million-dollar investment in Iran amid the heightened rhetoric of the US president against Iran, Ghosn insisted that Iran’s market holds major potential. “If we cannot work there immediately, then we will work there in 1 year, 2 years, 3 years because I do not think that this is a situation that can last forever.”

Erring on the Side of Caution

While Renault is determined to preserve its operations in Iran, it is not imperceptive of the possible dangers of its professional commitment.

Ghosn says, “However, we are not going to do so to the detriment of Renault’s interests—we will be watching closely to make sure our presence in Iran does not provoke direct or indirect reprisal measures on the part of American authorities.”

Ghosn said a Renault team working on the issue was “in direct contact with the American administration to work out what can be done and what cannot be done.”

The company has not sold its cars in the United States since abandoning the market in the 1980s.

Stalwart Partner

This is not the first time that Renault has chosen to remain a staunch partner for Iranian industries and fulfilled its undertakings.

Renault was the only western carmaker that did not leave the country when the sanctions against Iran intensified in 2011-12. The company’s officials have repeatedly proclaimed their commitment to the Iranian auto market and their customers in the country.

For instance on various occasions in 2015-16, Peyman Kargar who was director of Renault Middle East, told reporters that Renault saw Iran as a strategic business partner and the scope of collaboration transcended political factors.

In one case, he told Financial Tribune, “Security was not the main concern for Renault; that is precisely why the company never left Iran. Rather, it stayed and fulfilled its obligations to its customers while upholding international regulations.”

Kargar admitted that the fact that Renault never left Iran—unlike other European carmakers—does not necessarily mean that everything was hunky-dory for the company. “Limitations were in place and they took a toll on Renault’s performance in Iran,” he said.

In 2012, the French company would produce 450 vehicles in Iran on a daily basis. In July 2013, the sanctions peaked and affected the auto industry.

“Although the company managed to prevent production from come to a halt, production declined and sales dipped during the past two-and-a-half years, and Renault suffered losses,” he said.

According to Kargar, despite the decline in output, Renault continued to produce at least 50 vehicles per day.

Renault has also announced that it suffered losses worth €500 million during the time Iran was disconnected from the global supply chain.

Since then Kargar has become Chairman of Nissan (Renault’s partner) in Africa, the Middle East and India.

Market Share

Furthermore, during his recent speech in Paris, Ghosn touched upon the company’s active presence in Iran, pointing out that the company sold over 160,000 cars in Iran last year.

Earlier in January, Renault released its 2017 sales in detail, reporting that it sold 162,079 vehicles in Iran during the year, which accounts for 79.7% of vehicles sold by the major carmaker in the Middle East.

Renault Group is made up of the namesake Renault brand, Alpine, Automobile Dacia from Romania, Renault Samsung Motors from South Korea, and AvtoVAZ from Russia. Iran is the group’s eighth largest market and Renault’s third largest market after France and Brazil.

At the time, Renault’s country managing director for Iran, Pascal Felten, said that “Iran’s results are significant. Iran has acquired the first place in Renault brands sales in Africa and the Middle East and in the world after France and Brazil, the country is in the third place.”

“With an increase of 50% in market share now Iran’s name is shining in Renault’s world,” he added.

Felten vowed that Renault operations in Iran would be more focused on offering quality products and developing human resources.

With 162,079 vehicles sold in Iran last year, it registered a 49.3% YoY increase and a 10.8% share of the domestic market.

Currently, two Renault models Logan and Sandero are produced in Iran by local carmakers Iran Khodro, SAIPA and Pars Khodro.

Vehicles produced by the leading French auto company in other countries are also available in the local market through imports and are vastly popular with Iranian car enthusiasts due to their production quality and high-end after-sales services.