Iran has said it will sign a joint-venture deal with French car maker Renault by the end of October to produce a low-priced passenger car to replace the [1960s English Hillman Hunter-based] Paykan, a top-selling but outdated local favourite, Reuters reported.

Reza Veisseh, president of Iran's Industrial Development and Renovation Organisation (IDRO), said the joint-venture to produce the "L-90" model would start operating in mid-2004, Reuters said, citing the official IRNA news agency.

According to Reuters, Veisseh reportedly said that state-owned IRDO, a major shareholder in Iran's biggest car manufacturer Iran Khodro, will hold a 51% stake in the venture and Renault will hold 49%. No projected production figures for the L-90 were given, the report added.

Reuters said Iran's car market for about 400,000 vehicles a year is currently dominated by the box-shaped Paykan, which has changed little since Iran bought the licence to assemble the Hunter look-alike from its British maker in the 1960s.

But the Paykan's heavy fuel consumption and outdated design is blamed by many for the heavy pollution that generally enshrouds Tehran's capital, Reuters added.

Priced at $US8,000 for a basic model, the Paykan is expected to be phased out once the L-90, priced at 5,000-8,000 euros ($5,735-$9,175), hits the market, the news agency said.

Reuters noted that Iranian car manufacturers Iran Khodro and Saipa Auto also produce under licence Peugeot and Citroen, Nissan and Kia vehicles. Khodro in 2001 launched an Iranian-designed saloon car, known as the Samand, the report added.

Reuters said that car makers, which are among the state-dominated economy's biggest employers, are protected by tight import restrictions and high tariffs for imported vehicles.

To find out more about the vehicle industry and market in Iran, click here.

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