US Sanctions Slash PSA’s MENA Sales

EghtesadOnline: PSA Group’s sales in the Middle East and North Africa plunged 68.4% in the first half of 2019, punished by the automaker’s forced withdrawal from Iran under the threat of US sanctions.

News ID: ۷۴۷۸۷۹

16 July 2019

According to data published by the automotive group on Monday, PSA Group, maker of Peugeot and Citroen cars, sold 71,600 vehicles in the MENA region in the first half of 2019, down 68.4% compared to 226,100 units.

The figures were significantly higher in 2017 and amounted to 277,931 units, according to Financial Tribune.

In July 2018, the French automotive giant reported, “In line with the group’s decision to initiate the process of suspending its operations in Iran, vehicles manufactured in Iran are no longer included in consolidated global sales, as of May 1, 2018.”

It further reported at the time that the group’s sales amounted to 226,100 units in the region, down 18.6% due to the fact that sales of vehicles produced in Iran have not been included in consolidated global sales since May 1. The aforementioned number includes 141,000 vehicles sold under a Peugeot license in 2018 by Iran Khodro until April 30.

Major Iranian car companies, Iran Khodro (IKCO) and SAIPA, both had strong ties to the PSA.

PSA Group’s Peugeot and Citroen forged joint venture agreements with Iranian carmaker Iran Khodro and SAIPA respectively after the 2015 Iran nuclear deal was clinched. After US President Donald Trump withdrew Washington from the historic accord, the French automotive giant has announced that it is forced to halt its operations in Iran.

IKCO and Peugeot signed a €400-million deal in June 2016. Through the 50-50 joint venture known as IKAP, three models, namely Peugeot 208, 2008 and 301, were to be produced in Iran. However, only a limited number of the 2008 model were produced before Peugeot quit Iran.

SAIPA and PSA’s brand Citroen signed a 50-50 joint venture in late 2016, based on which the Paris-based carmaker had undertaken to invest more than €300 million in Iran. Two Citroen models, namely C3 and C4, were to be mass-produced in the country, but the plan was nipped in the bud by the sanctions.

Emerging Market Setbacks

PSA’s vehicle sales fell 12.8% in the first half, as emerging markets weighed on its overseas business, challenging the trajectory of the Peugeot manufacturer’s recovery.

Sales fell to 1.9 million light vehicles in January-June, the company said on Monday, from 2.18 million a year earlier.

Notching up successive sales and profit records under CEO Carlos Tavares, PSA is due to report full earnings for the period on July 24.

In Europe, its biggest market by far, PSA eked out a 0.3% gain in sales that lifted its share in an automotive market that was down 2.5% overall. The Opel-Vauxhall business acquired from General Motors in 2017 also gained ground in the region.

“Despite the decline of the global automotive markets for the first half, our commercial teams have managed to increase market shares in several countries,” Tavares said in the company statement.

PSA recorded sharp declines almost everywhere else, however, with deliveries down a further 60.6% in China, where the group has suffered a protracted sales collapse at its joint ventures with local manufacturers Dongfeng and Changan.

Sales volumes were also down 29.3% in a contracting South American market.

After posting a 7.7% operating margin for 2018, PSA’s 4.5% group profitability goal for 2019-21 still looks conservative, with many investors expecting more.

The carmaker’s shares were up 1.2% at €22.29 by 0714 GMT on Monday.