Peugeot delay to begin production perplexes Iranians

EghtesadOnline: Paris-based PSA has yet to start production of the Peugeot 2008 in Iran despite the launch of an assembly line in the country seven months ago.

News ID: ۷۸۰۲۶۳

04 November 2017

The maker of Peugeots and Citroens announced a joint-venture worth 400 million euro ($450 million) with its former local partner Iran Khodro (IKCO) in May for the joint production of 200,000 cars per year in Tehran.

Back then, according to PressTV, Iranian President Hassan Rouhani attended a ceremony to mark the production launch of the mini-SUV, in what was branded the first product of post-sanctions manufacturing deals with foreign carmakers.

However, the line has not become operational yet, with IKCO having to import pre-owned cars for delivery to its customers, the Fars news agency reported on Saturday.

“According to the Ministry of Industry statistics, only four Peugeot 2008 vehicles have been manufactured at Iran Khodro during the first seven months of this year, and those were also assembled at the time of the opening of the production line in the presence of the President,” the report said.

Since the lifting of sanctions on Iran in January 2016, French carmakers PSA and Renault have used the absence of major automakers to pile into Iran’s resurgent market. Their return has helped both companies turn around a period of slipping sales which occurred when they left Iran in 2012.

US President Donald Trump’s refusal last month to endorse the 2015 nuclear agreement with Iran and his threat to levy new sanctions on the country has raised new questions about whether companies like Peugeot and Renault would pull out unilaterally again.

On Monday, Deputy Minister of Industry, Mine and Trade Mohsen Salehinia tried to give assurances that the new contracts with the French carmakers were watertight.

PSA has signed production deals worth 700 million euros, while Renault has announced a new plant investment to increase its production capacity in Iran to 350,000 vehicles a year.

“Up to this moment, even the slightest sign of skepticism about continuing cooperation has not been sighted in the companies,” the Mehr news agency quoted Salehinia as saying.

Even so, “about eight paragraphs related to levying compensation from Peugeot has been included in the new contract,” he said.

According to Salehinia, Peugeot had also accepted to compensate IKCO over its unilateral withdrawal after sanctions were intensified on the Islamic Republic in 2011.

“Part of Peugeot's compensation to Iran has been in the form of sending parts and the other in the form of staff training. This compensation term is also seen in the new contracts of Iranian automakers with the Europeans.”

The official said he was optimistic about foreign companies holding their ground in case the Americans toughened their measures against Iran.

“At any rate, these threats have been raised over the past few weeks but the determination of foreign automakers to continue working in Iran is serious,” Salehinia stressed.