Iran Khodro says it has agreed a deal with Mahle to design and develop three-cylinder engines in a EUR125m (US$139m) agreement in the latest series of manufacturing initiatives following the recent lifting of sanctions by the West.

The Iranian automaker maintains the 120hp-160hp powerplants will confirm to Euro6 standards and will deliver 4L/100km.

"We will design and develop four powertrains that can mostly cover our need for our future cars," said IKCO CEO, Hashem Yekehzare.

"These powertrains will meet the world's technologies and the contract includes full technology transfer, while the second powertrain onwards will be designed and manufactured by IKCO.

"Design will take 30 to 33 months and the pre-production phase will come next, following which 350,000 powertrains will be mass-produced annually."