October 14, 2016
Iran’s second largest automaker Saipa, and Europe’s second largest, PSA Group of France, last week signed a deal to launch a joint venture to produce and sell Citroen cars in Iran.
The joint venture will bring an investment of 300 million euros ($333 million) to Iran, one of a handful of major investments made in Iran since the end of sanctions. In June, PSA Group announced it would invest 400 million euros ($450 million) in a joint venture with Iran Khodro to produce Peugeots in Iran.
Based on the new deal with Saipa, Citroen cars will be produced in Kashan at a plant that will be jointly owned by the two companies.
Before this year, PSA Group was named PSA Peugeot Citroen. Saipa has been the firm’s historic partner in Iran for Citroens since the 1960s.
Carlos Tavares, chairman of the PSA Group Managing Board, told reporters after signing the agreement, “With more than 50 years of presence in Iran, PSA Group through this new strategic partnership is clearly committed to the deployment of a rich product plan that meets the expectations of Iranian clients,”
He said the agreement envisages the transfer of technology and a significant level of local content, but he didn’t put any numbers on the scale of Iranian-made content.
“Also, Citroen models will be sold throughout the country through a network dedicated exclusively to the brand. No less than 150 Citroen outlets will open in the next five years,” Tavares added.
Saipa manufactures a third of the Iranian car output, while Iran Khodro leads with about half of national production.
The automobile industry is Iran’s biggest non-oil sector, accounting for nearly 10 percent of the country’s GDP.
A point of friction between Iran and the PSA Group is its sudden departure from Iran when the EU imposed sanctions. The Islamic Republic has been demanding compensation for the damage that the withdrawal did to Iran’s economy.
According to the Fars news agency, Hashem Yekke-Zare, the managing director of the Iran Khodro Company, said, “A total of 427.6 million euros ($533 million) of compensation will be paid by Peugeot to Iran Khodro because of the losses.”
Yekke-Zare said the compensation would be mostly in services and discounts, including auto parts for current models being produced in Iran.
Peugeot had also written off 11 million euros of Iran Khodro debts plus 65 million euros in royalties owed between 2012 and 2016, he said.
Saipa did not say what kind of compensation, if any, it will receive.
