PARIS (Reuters) -- PSA/Peugeot-Citroen is in advanced talks over an Iranian carmaking venture with its local partner, Iran Khodro. PSA said it expects rapid progress following the diplomatic breakthrough that lifted sanctions against the country.
The new venture would build cars from scratch using the automaker's latest vehicle architectures and engines, PSA Africa and Middle East chief Jean-Christophe Quemard said. "This project will deliver a generational leap," he said.
Under an existing partnership, Iran Khodro re-assembles older PSA models made in European plants.
Iran has agreed to curb its nuclear program in return for the lifting of international sanctions that have crippled its economy. Quemard said the deal struck between Iran and Western powers "should clear the way for significant progress in our discussions."
PSA was the leading foreign player in Iran until sanctions were imposed in 2011. The company will face tougher competition on a market where Chinese rivals have since gained a firmer foothold. French rival Renault also aims to revive production of its no-frills Logan sedan, known locally as the Tondar.
Ford, VW interest
Other Western carmakers including Volkswagen Group and Ford Motor have long been poised for re-entry, industry insiders have said, in anticipation of the detente finally announced on Tuesday. Both companies reiterated on Tuesday that they have no current business in Iran.
PSA stopped supplying knock-down kit versions of its 206 and 405 models to Iran Khodro in 2012 under pressure from then shareholder General Motors, which has since sold its 7 percent stake. But the Iranian partner soon began sourcing through intermediaries -- effectively maintaining the French brand's near-30 percent share of the promising Gulf market. Some 350,000 Peugeot-badged vehicles were registered in Iran last year, according to the French carmaker.
The imminent lifting of financial sanctions "will reopen the normal parts supply chain," allowing PSA once again to book those sales, Quemard said on Tuesday. The planned manufacturing venture would also serve export markets, he said.
Financial analysts Evercore ISI estimates that Iran sanctions cost PSA 120 million euros in annual earnings and Renault 56 million euros. The market is "important and potentially lucrative" to both automakers, Evercore automotive analyst Arndt Ellinghorst said today in an note to investors.
A PSA spokesman said discussions are in progress with other potential Iranian partners but talks are most advanced with Iran Khodro.
A Renault spokesman said: "The new deal is good news. Iran is once again a strategic and important market." The spokesman declined to comment on the automaker's specific plans for Iran.
Bruce Gain contributed to this report
