Report – Iran becomes the next battlefield for French automakers image

France’s PSA Peugeot Citroen was the top automaker from Europe in Iran before the sanctions were imposed. And it now aims to recapture the sales crown, but the competition could come from an unexpected place – France.

The setback in reclaiming the throne could have the name of its domestic rival – Renault. PSA has been hard at work renegotiating an agreement it had with partner Iran Khodro, the country’s biggest carmaker, in a bid to secure a larger production agreement even as the latter is still upset by PSA’s abrupt departure back in 2011 when the sanctions against the auto industry were imposed. According to sources that have knowledge of the proceeds, Renault wants to use $560 million of its cash that has been trapped in limbo in Iran to take advantage of PSA’s predicament with the angered Iran Khodro, because the July international agreement has ended the sanctions on Tehran. “PSA has made a lot of statements (about Iran),” claims one of the people, who refrained from being named because of ongoing negotiations. “Chickens shouldn’t be counted before they are hatched.”

Iran is already the Middle East’s largest auto market and is seen as one of the last “virgin” emerging markets. With a populace of 80 million consumers and just 1.1 million vehicles sold last year, the potential for explosive growth is luring the automakers. And the sanctions could be lifted as soon as March 2016, according to Britain’s foreign minister, meaning investments are a go. The earlier agreements with Iran Khodro had the Iranian automaker building both Renault and Peugeot autos from complete knock-down kits (CKD).

Via Reuters