Foreign Auto JVs Under Iran Gov’t Scrutiny

EghtesadOnline: The Iranian Ministry of Industry has instructed local carmakers and their foreign partners to submit reports of their activities and achievements.

News ID: ۷۸۰۴۸۱

18 November 2017

Deputy minister of industries, Mohsen Salehinia says, “Next week a joint session between ministry officials, local automotive companies, parts makers and their foreign partners will be held in Tehran.”

“The companies are required to present reports related to their performance and  financial status. The companies are required to report what they have accomplished so far.”

According to Salehinia, domestic carmakers and their foreign counterparts should hand in a comprehensive report on the status of their collaboration, future plans and timetables, Financial Tribune reported.

Lack of raw material and insufficient investment has become a major constraint for the key auto industry. Salehinia says, “During the joint meeting companies have the opportunity to provide evidence on these matters,” implying that after studying the data a plan of action to remove the hurdles can be devised.

Delayed Peugeot Production

Iran Khodro and SAIPA, the two main car companies have signed two separate joint venture deals with Groupe PSA’s Peugeot and Citroen.

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

The Iranian company officially inaugurated production lines of the model in May and soon after started presales. In a matter of days 16,000 units were presold. Car buyers each gave 600 million rials ($15,000) in down payment to the company. However, IKCO is struggling to ‘produce’ the vehicle. According to statistics released by the Ministry of Industries, so far only four units of the model have been assembled.

Salehinia says, “IKCO should significantly increase production of Peugeot 2008. At least 22,000 units should be delivered before September 2018.” To meet the deadline, IKCO should assemble at least 2,200 units every month.

Furthermore, the share of Iran-made parts in production of the model should reach 40% before the end of the current fiscal [next March], he added.

IKCO and other local automakers have been routinely criticized over the meager share of Iran-made parts in their production. Experts and critics are of the opinion that Iranian automotive companies are largely assemblers of imported parts.

One of the hot topics about foreign automotive joint ventures is export of the “locally manufactured cars.” Through its joint venture deal with IKCO, the French automotive giant has agreed to sell 30% of cars made in Iran under the Peugeot brand through its global sales network.

Salehinia says by September 2018 at least 6,000 units of Peugeot 2008 made in Iran have to be exported through the French company’s global sales network.

Earlier this week IKCO announced that it will “start test production” of Peugeot 301 in the coming days. Salehinia says, “Mass production of Peugeot 301 will be launched in April 2018 and 50% of the parts used in the model should be manufactured in Iran.”

While IKAP takes the brunt of government scrutiny and with the Citroen-SAIPA  deadline drawing closer, market observers are worried that the latter will fall into the same pitfall as IKCO-Peugeot.

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

SAIPA chief Mehdi Jamali has repeatedly promised that first “locally made” Citroen cars will arrive in the market before the end of current fiscal. However, so far, save for an unimpressive sign put up in front of SAIPA’s Kashan production plant that reads “SAIPA Citroen Company” nothing else is visible!