PSA/Peugeot-Citroen aims to export cars it produces in Iran with local partner Iran Khodro, the automaker's boss for the region said, as the French company looks to rebuild its business in the country following the diplomatic agreement last week ending sanctions over Iran's nuclear program.
"We plan to establish local production in order to export cars from our JV [joint venture] factory,” PSA head of Middle East and Africa Jean-Christophe Quemard told Automotive News Europe in an e-mail.
PSA stopped supplying complete knockdown (CKD) versions of its aging Peugeot 206 and 405 models to Iran Khodro in 2012 under pressure from then shareholder General Motors, which has since sold its 7 percent stake in PSA. European and U.S. carmakers had to stop doing business in Iran during that time because economic sanctions against the country were extended to the automobile sector.
Now PSA wants to invest in a local factory to produce current-generation models that it will sell inside and outside Iran. A PSA spokesman declined to reveal the names of the other countries. Currently, Iran Khodro supplies Peugeot vehicles to Azerbaijan, Iraq, Armenia, Uzbekistan, Turkmenistan, Syria and Afghanistan, according to a report by Iranian news network Press TV. That report said PSA and Iran Khodro would establish a 50-50 joint factory that would export 30 percent of its output.
The PSA spokesman said that discussions are in progress with multiple potential Iranian partners, including Saipa, which used to produce Citroen models, but talks are most advanced with Iran Khodro.
Industry watchers say it will likely be several months before the sanctions are lifted completely. The European Union, for example, has agreed to end sanctions but has not yet said when the change will take place. PSA will also likely only begin to use Iran as an export hub once it has begun to produce volumes to meet strong demand in Iran.
“As a first step, they will probably go back to the structure they had before, i.e. importing CKD kits and assembling them locally,” Sascha Gommel, an analyst for Commerzbank, told Automotive News Europe. “Exports would probably only be a second step.”
About 350,000 Peugeot-badged vehicles were registered in Iran last year, according to the French carmaker. The PSA spokesman said Iran Khodro began sourcing parts through intermediaries when the French automaker stopped supplying it CKD kits in 2012. This helped maintain the French brand's near-30 percent share of the Iranian market share. The PSA spokesman said that the automaker doesn't profit from the sale of those models and does not include them in its global unit sales total.
Iran has agreed to curb its nuclear program in return for the lifting of international sanctions that have crippled its economy. Quemard told Reuters this week that 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 in a market where Chinese rivals have since gained a stronger foothold. Media reports say PSA's French rival, Renault, also aims to revive production of its no-frills Logan sedan, known locally as the Tondar. A Renault spokesman, however, would not disclose the company's plans for the Iranian market when contacted by ANE.
Financial analysts Evercore ISI estimates that the section against Iran cost PSA 120 million euros in annual earnings and Renault 56 million euros. The market is "important and potentially lucrative" to both automakers, Evercore ISI automotive analyst Arndt Ellinghorst said in note to investors.
Other Western carmakers including Volkswagen Group and Ford have long been poised for re-entry, industry insiders have said, in anticipation of the recent agreement. Both companies reiterated on Tuesday that they have no current business in Iran.
Reuters contributed to this report