French Carmakers to Offer Packages to Remain in Iran

EghtesadOnline: French carmakers, PSA Group and Renault have held talks with Iranian officials during recent weeks to come up with “packages” to preserve their operations in the country.

News ID: ۷۸۳۱۲۴

01 July 2018

In the face of mounting pressure from the hawkish US President Donald Trump on international firms to ditch their Iran operations, and new sanctions to be reimposed against the country, the French automotive giants have held meetings with their local counterparts and relevant authorities to prolong their activities in the huge automotive market of Iran, deputy Industries Minister Mohsen Salehinia was quoted as saying by Mehr News Agency on Tuesday.

Pointing to several similar sessions over the past few weeks, Salehinia says, “Representatives of Renault and PSA Group are exploring ways to maintain their presence in Iran and ensure their extensive collaborations with local makers.”

“We are looking for mechanisms to enable all parties to honor their commitments,” Financial Tribune quoted him as saying.

While acknowledging the problematic nature of US threats which can disrupt Iranian firms’ international agreements, Salehinia emphasized the need to work together in these tough times so as to work out solutions that could benefit all parties involved.

“The French carmakers had directed funds and efforts toward their joint ventures with their Iranian partners. Certainly, they want to find a way to preserve the investment,” he noted.

“The two carmakers are resolved to retain their Iran operations. However, the underhand move by the US government can interrupt their activities.”

According to Salehinia, PSA Group’s Peugeot brand has already made an investment in Iran. If the firm is forced to abandon its Iran operations in addition to freezing the company’s assets in the country, Peugeot will be required to pay penalties as well.

Salehinia also says while Iranian carmakers have forged ties with foreign firms, they are not over-reliant on their agreements with these firms. “In case French carmakers are forced to leave Iran while facing hardships, Iranian carmakers will not be forced to shutter their businesses.”

Trump’s Belligerence

Following the belligerent US president’s decision to scrap Iran’s historic nuclear accord back in May, several foreign companies backtracked on their collaboration agreements with Iranian firms, fearing US reprisal.

As a stalwart business partner of Iran, Renault has asserted that it will remain in the Iranian auto market despite sanctions, as it does not sell cars in the United States. Even though the company might be forced to curb current operations in Iran, Renault will refuse to totally abandon its joint ventures with Iranian entities.

As for Group PSA, the firm announced earlier this month that they intend to suspend operations in Iran in order to “comply with US laws,” and would not reverse course unless sanctions waivers are issued.

Group PSA’s Peugeot is set to reportedly announce its final decision regarding the matter in the coming days.

Unviable Option

Ever since the Washington pullout, several European authorities have condemned the bellicose tone adopted by Trump against Iran.

In a recent meeting with his Iranian counterpart, Chairman of Paris Chamber of Commerce Didier Kling said, “Europe seeks new channels for expanding cooperation with Iran, one of which might be opening a bank that deals in a currency other than the US dollar, thereby, removing the existing barrier.”

He added that Iran is one of the largest target markets of French carmakers; therefore, abandoning the country would be an unviable option.

Group PSA’s Peugeot and Citroen brands and their arch-rival Renault have signed joint ventures with Iranian companies since 2016, after the historic nuclear deal known as the Joint Comprehensive Plan of Action was reached between Iran and six major powers.

Peugeot and Citroen signed two separate joint venture deals with the two leading Iranian car companies, Iran Khodro and SAIPA.

IKCO and Peugeot signed a €400-million deal in June 2016. Through the 50-50 joint venture known as Iran Khodro Automobiles Peugeot (IKAP), three models, namely Peugeot 208, 2008 and 301 were to be produced in Iran.

IKCO produces four Peugeot models namely 405, 206, 207 and 2008. According to data obtained from the Ministry of Industries, during the nine months to Dec. 21, 2017, 327,320 Peugeot cars were produced in Iran.

Renault signed a €660-million trilateral production deal with Industrial Development and Renovation Organization of Iran and a local private company Negin Khodro in August 2017. Three Renault models, namely Kwid, Duster, and Symbol, are to be manufactured in Iran under the deal. It is reported that the first Kwids are likely to be available on the market by late 2018.

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

On the whole, Iran has been a driving force for the sale of the two French auto manufacturing companies, holding 21% of Peugeot’s and 6% of Renault’s worldwide shares in global sales in 2017.

SAIPA and PSA Group’s Citroen brand signed a 50-50 joint venture in late 2016 under which the Paris-based carmaker has undertaken to invest more than €300 million ($352 million) in Iran over the next five years. Two models were to be produced through the JV, namely C3 and C4.