PSA has secured an Iran production deal which will see 40% of content localised

PSA has secured an Iran production deal which will see 40% of content localised

PSA Peugeot Citroen says a condition of its US$436m joint venture deal with IKCO is it must source 40% of components in Iran.

The agreement – announced with much fanfare in Paris this week in front of French Prime Minister Manuel Valls and Iranian President Hassan Rouhani – could fire the starting gun for several more major automotive agreements with Tehran – with the proviso domestic content is prioritised.

PSA Peugeot Citroen and Renault have long beaten a path to Tehran – PSA for 30 years for example - through local partners - but it has been the crippling lack of modern components which has hampered development of the industry as a whole and led to significant pollution problems as outdated parts start to take their environmental toll.

"There is a condition of how we will work with Iranian companies," a PSA spokesman told just-auto from Paris. "Forty percent of the sourcing will be in Iran.

"The EUR400m...is what we could invest in the next five years – that depends on the market – it is realistic."

PSA and IKCO will set up as a 50:50 joint venture, which will see a Tehran facility established to produce vehicles and whose platform the Iranian company will share to develop its own models as well as the 208, 2008 and 301 Peugeot cars.

"We have been working with them [IKCO] and they assemble our vehicles," added the PSA spokesman. "Of course we are going to be careful on that.

"There are still things to finish. It is a binding agreement – the final agreement [is due to close] in the middle of this year [and] we are having the first production vehicles in the second half of next year."

The PSA spokesman noted there were currently 4m Peugeots on Iranian roads today – a legacy of the French automaker's 30-year involvement with the country – while before it left in 2012 it sold 450,000 vehicles.

"Our vision is a volume that is significant," said the spokesman. "The Middle East and Africa – it is our third pillar – our foundation."

PSA was not immediately able to confirm whether the joint venture would create new jobs, but the deal will surely generate employment opportunities if the market starts to revive.

"The idea is to produce in a local way – like our factory in Morocco which will happen in 2019. " added the PSA spokesman.

"The history of PSA is we are a recognised brand in Iran. Relations, in spite of international sanctions, have never stopped.

"Relations have always been conserved – this history is not stopping."

French supplier association, FIEV, has created a 'Club Iran' subsidiary, building on six visits to the country in order to build component manufacturer relationships and its presdient, Didier Hedin, insists the country represents significant future opportunity.

"I think there is huge potential with Iranian production of cars," Hedin told just-auto from Paris.

"The target [is] to reach around 3m cars in 2025 with around 2m in 2020. Two million is good; if you compare in Europe with Spain, France, Italy, UK, it is around this point we are playing."

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