IDRO-Renault Deal Shrouded in Doubts

EghtesadOnline: Iranian automakers have voiced their displeasure and MPs have questioned the legality of the MoU signed by the Industrial Development and Renovation Organization with Renault in September.

News ID: ۷۷۱۲۳۸

12 November 2016

In an interview with Donya-e-Eqtesad, Financial Tribunes sister publication, Mansour Moazzemi, director of IDRO, elaborated on the MoU.

Moazzemi said as per the law, the Iranian government can own up to 20% of the country’s auto industry.

“At present, the government owns 8.6% of the production capacity, 11% of the production and 7% of the market,” he said.

Moazzemi said, “IDRO will not produce vehicles but, according to its Article of Association, will only invest in the industry and eventually sell its shares to the private sector.”

The official claimed that his organization has been more successful in forging the MoU (compared to SAIPA and Iran Khodro) since it has a long history of collaboration with international companies.

Asked which party initiated the negotiations, Moazzemi said, “It does not matter.”

When the two automotive giants of Iran, Iran Khodro and SAIPA, signed deals with Peugeot and Citroen respectively, Renault was still hesitant about forging a joint venture in the country, while both companies were trying to pressure the company into negotiations.

It was speculated that Renault is keen on signing contracts with both IKCO and SAIPA, which was opposed by Iran’s Ministry of Industries, Mining and Trade.

The reason cited by some experts for the ministry’s objection to a dual deal was the failure of similar contracts in the past.

In fact, Renault has been working simultaneously with both SAIPA and IKCO over the years, but it seems that the ministry was not satisfied with the outcome of those collaborations, according to Financial Tribune.

Officials believe dual deals could give rise to a conflict of interest.

Subsequently, the ministry issued a directive obliging the foreign company to undertake a project with only one Iranian firm at a time.

It seems that by signing a deal with IDRO, which is one of the major shareholders of both companies and oversees their activities, Renault has got its way in Iran.

In response to these criticisms, the only answer that Moazzemi repeatedly gave was, “To sustain growth, Iran’s auto industry needs to team up with international carmakers.”

Another point of contention about the MoU was handing Bonro, one of the subsidiaries of SAIPA, to Renault while IDRO has no legal claim to the company.

In October, SAIPA officials said IDRO did not own the Bonro site and hence could not sell it.

Moazzemi said SAIPA was negotiating a deal with a foreign company to offer Bonro, which was also opposed by Iran’s Ministry of Industries, Mining and Trade.

“Following recent negotiations, SAIPA has agreed to hand Bonro to IDRO,” he said.

According to Moazzemi, SAIPA owes 8 trillion rials ($2.3 billion) to IDRO and it seems that the organization has used the horrendous debt as leverage to force SAIPA into an agreement.

Previously, local media reported SAIPA was aiming to sell the Bonro production plant to Chinese automaker Changan and had offered a 50% share in Pars Khodro (another subsidiary of the company) to Renault.

The official’s claim followed reports that SAIPA had offered another factory in Khomein to the Paris-based company called SAIPA Khomein.

By ignoring IDRO’s announcements, SAIPA Khomein’s CEO Ayoub Paydar jumped on the bandwagon created by the media and suggested that SAIPA Khomein production plant meets the standards of Renault, and if the Ministry of Industries, Mining and Trade approves the idea, the Paris-based company can start the production of new models at the plant.

During the interview with Donya-e-Eqtesad, Moazzemi said the final deal between Renault and IDRO would be signed in November.

The official stated that Iranian carmakers are to sign two other deals with foreign automakers, confirming that one of the deals would be with Volkswagen.

Referring to reports that Volkswagen has held talks with two Iranian companies, Kerman Motor and Mammut Group, Moazzemi denied that Kerman Motor would partner with VW in Iran, but did not name any other company that would work with VW.