Kia Motors’ compact entry-level Rio sedan model will be assembled and sold in Iran market from early next year.

Under the agreement between Kia and its Iranian partner, Saipa Corporation, which already locally produces the Pride subcompact hatchback, the Rio will be assembled from knockdown (CKD) kits shipped from South Korea.

Saipa will install new facilities at its Tehran plant and will begin production in early 2005. It plans to build about 100,000 Rios a year.

Coupled with annual production of 200,000 Pride subcompacts, the Tehran facility will now have capacity for 300,000 vehicles.

Saipa began assembling CKD Kias in 1993 and has produced 739,875 Prides to date.

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Imports of completely assembled vehicles are prohibited in Iran so prospects are bright for locally assembled compact passenger cars, Kia said in a statement.

The Pride accounted for 196,864 of the 600,000 vehicles assembled and sold in Iran last year, giving the popular model a 32% share of the market and making it the top selling passenger car in Iran.

Kia’s competitors include Iran Khodro which builds Peugeot-derived models and still makes the UK-designed late-1960s Hillman Hunter sold as the Peykan. Iran Khodro recently inked a deal to build a derivative of Peugeot’s 206 (likely to be a sedan as this body design is more popular than the hatchback style in this market) exclusively in Iran for both local sale and export, primarily to new markets in eastern Europe.

Kia Motors expects to sell 240,000 Prides in Iran by the end of the year, a 22% increase over the previous year.