Sources in Iran claim IKCO is continuing to produce Peugeot vehicles in the country despite PSA ending parts shipments as European Union sanctions continue to bite.
Exact figures are currently unavailable as to how many Peugeot models are rolling off IKCO production lines, but the source maintains localisation is the key to continued build.
"Most of them [Peugeot models] have been localised 100%," the source in Iran told just-auto. "For example, the 206 completely, this is the model being produced here.
"There is no need to import parts and components - 206, 207 [and] 405 are being produced."
The insistence IKCO is still able to produce Peugeot cars comes as the French automaker reiterated it no longer supplies parts to Iran, partly as as result of the difficulties in obtaining finance due to severe banking sanctions imposed by the European Union and the US.
"Because of the sanctions taken against Iran, we can't finance our activity there," a PSA spokeswoman told just-auto from Paris. "It is totally suspended.
"We do not sell any more parts to Iran - we used to sell them to Iran Khodro. We have absolutely no other comment to make."
PSA's involvement with Iran - as well as several other western automakers in the country - has been a hugely sensitive issue given the draconian sanctions regime that aims to dissuade Tehran from developing what some maintain is its proposed enrichment of uranium for nuclear weapons.
Lobby groups in the US, such as United Against Nuclear Iran (UANI), have previously targeted PSA as well as its partner, General Motors, by highlighting what it referred to as the "taxpayer-funded US$50bn bailout of GM".
Only two months ago, UANI said tens of thousands of Peugeot-branded vehicles were being produced in Iran, including nearly 204,000 during the Persian calendar year ending 20 March.
"Once again, we see evidence GM's partner, Peugeot, continues to do business in Iran," said UANI CEO, Mark Wallace, in April this year, although PSA insists it has stopped shipping parts.
A separate Iranian source confirmed to just-auto sanctions had had an effect on the country's car sector: "Of course there were some difficulties and some problems, but we try to solve them through other choices, other options," the source said.
The second Iranian source added companies were looking to subcontract component production for parts that currently had to be imported and highlighted the role of localising.
"We have many projects for localising and deepening [the] localisation process," the source noted.
Several reports are also currently circulating two other major western automakers have withdrawn from supplying Iran with parts, although these have not yet been verified.
In June last year, PSA put its involvement with IKCO at 1.5% of its EUR79bn turnover.