PSA has fired the starting gun for major Iran auto activity with its EUR400m IKCO JV announcement

PSA has fired the starting gun for major Iran auto activity with its EUR400m IKCO JV announcement

PSA Peugeot Citroen and IKCO have announced a 50:50 joint venture, which will see a Tehran facility established to produce vehicles, whose platform the Iranian company will share to develop its own models.

Unveiling of the EUR400m (US$436m) JV comes just days after most economic sanctions imposed by the West in retaliation for what it regarded as Iran's enrichment of uranium for possible nuclear weapon development, were lifted.

It is also no coincidence the news emerged during today's (28 January) State Visit by Iranian President Hassan Rouhani to Paris, where the red carpet treatment resulted in the five-year deal, which will see Peugeot 208, 2008 and 301 models manufactured.

The agreement provides for:

. The restoration of contractual relations concerning the manufacture of Peugeot-branded vehicles currently produced in Iran.

. The creation of a joint venture on an industrial site in Tehran to produce new Peugeot vehicles, on a platform, which will also be used by Iran Khodro to develop its own vehicles.

. The capacity to export JV products across the region

"Coming one week after international sanctions were lifted, this agreement marks the beginning of a new chapter for both partners," said a PSA statement.

"The deal, which will be backed up by technology transfers and significant levels of local content, will come into effect once it is implemented, i.e., around mid-2016.

"The first vehicles will roll off the production line at the Tehran plant in the second half of 2017."

PSA estimates the Iran market will regain its 2011 peak of 1.6m vehicles within two years and reach 2m models by 2022.

Current estimates put the number of Peugeot cars on the road in Iran at more than 4m.

The French automaker added Iran is a key component of its development strategy in the Middle East & Africa region, which is PSA's third-fastest growing international market.

The Group sold 180,200 vehicles in the region in 2015, up 6.4%.

"This agreement turns the page on the period of international sanctions and enables PSA and Iran Khodro to start a new chapter in their 30-year history of cooperation," said PSA chairman, Carlos Tavares.

"Our shared ambition is to offer our customers high-tech products to deliver mobility that meets the highest comfort, safety and environmental standards."

The news also comes in the same week as PSA opened a DS showroom in Tehran.