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PSA Groupe says it is aiming for a localisation rate of up to 60% in Iran with its SAIPA joint-venture as the pace of automotive development ramps higher following the ending of most international economic sanctions.

The automaker – along with its French counterpart Renault and several major suppliers – is part of a rush to reindustrialise Iran following the ending of international sanctions and despite a lukewarm attitude to Tehran from newly-installed President Trump.

PSA localisation is currently 20% – for example with the 2008 – but could rapidly reach 40% and subsequently 60% once full-speed production is achieved.

France has long enjoyed strong ties with Iran, even during the sanctions years imposed by a suspicious West nervous about Tehran’s potential ambitions to enrich uranium for possible nuclear weapons development, with PSA in a clutch of companies beating a path East from Paris to take advantage of the relative liberalism.

To that end, PSA has already inked a joint-venture with SAIPA, Citroën’s historic partner in Iran since 1966 to produce and sell vehicles in the country, with production slated to start in 2018.

The 50/50 EUR300m (US$318m) joint-venture will cover the value chain from the design stage through to vehicle marketing, including purchasing, with manufacturing at the Kashan plant in Iran, which will be 50% owned by PSA Groupe.

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By GlobalData

The agreement will be backed by technology transfers and a significant level of local content, with a similar deal penned between PSA and Iran Khodro having potentially up to 80% localisation, a figure outlined to just-auto by Iranian Industry Minister, Mohammed Reza Nematzadeh last summer.

Iran’s march back from the economic cold to the international business community in the form of joint-ventures does appear to come with some strings attached however, namely that hefty rate of localisation as the country looks to ride the wave of optimism emanating from Tehran.

“There are minimum localisation [rates] required by Iranian legislation,” PSA Groupe Middle East and Africa EVP, Jean-Christophe Quémard, told just-auto from Tehran. “There is strong integration, beyond that, what the SAIPA-PSA [joint-venture] has said [is] there will be maximum integration that will go as fast as possible.

Quémard added PSA was looking for a 40% market share in Iran, where Peugeot already enjoys between 30% and 33% of domestic sales.

“[The] 2008 is at 20% [localisation] – one year from now [it] is 40%,” he added. The Iranian market is going very well at the moment.”

The 50/50 PSA-Iran Khodro joint venture is expected to invest up to EUR400m during the next five years in manufacturing and R&D capacity.

Quémard’s comments formed the backdrop to this week’s fourth Iran International Automotive Industry Conference (IIAIC) in Tehran, where Secretary General, Sasan Ghorbani, noted: “Despite all the constraints caused by intensified sanctions in the recent years, not only [has the] Iranian Automotive Industry survived, but also production capacity increased.

“In the meantime, [the] Iran nuclear negotiation team with full support of our nation and its efforts have reached an agreement which provided a rare opportunity for this major national industry to surge.

“Therefore, last year for the Automotive Industry was somehow different, managers in this industry within the new situation after the nuclear deal, had more powerful position in their negotiations with their foreign counterparts and also had more choices when it comes to choosing a partner.”