Iran Signs Its Biggest-Ever Car Deal with Franceís Renault
Iran is increasingly attracting foreign investors, despite
restrictions imposed by the United States over its missile program
and its military activities in the region.
The French carmaker Renault signed a multimillion-dollar deal in Tehran on
August 7, agreeing to raise vehicle production in Iran just days after
President Trump signed into law new sanctions against the country.
The roughly $780 million agreement to produce as many as 150,000 additional
cars a year is the largest foreign auto deal in Iranís history. It was a
victory for President Hassan Rouhani, who was sworn into office on August 5,
after being re-elected this year promising to revitalize an economy hurt by
Iran is increasingly attracting foreign investors, despite restrictions
imposed by the United States over its missile program and its military
activities in the region.
American restrictions stop most international banks from providing financing
or credit to Iran, and the country is cut off from international payments
systems for using debit and credit cards.
On August 2, President Trump signed into law new sanctions against Iran,
Russia and North Korea. It is unclear if the Renault deal violates any
unilateral US trade barriers still in place against business with Iran.
Still, the agreement to establish a joint venture with a government-run
conglomerate is welcome news for Iran.
Renault has pledged to open two factories with Iranian partners.
Sanctions lawyers in the United States said Renaultís decision to proceed
with the joint venture indicated it was confident that the nuclear deal
would survive, despite the Trump administrationís threats to withdraw from
Farhad Alavi, managing partner of the Akrivis Law Group in Washington, said
Renaultís decision also signaled that it had ďlikely undertaken a great deal
of care to ensure that it is fully compliant.Ē
Another major French carmaker, Groupe PSA, which produces brands like
Peugeot and CitroŽn, has stepped up its activities in Iran since the lifting
of the sanctions last year, while the French energy giant Total signed a
deal with Tehran last month to lead a natural gas project.
Renault said in a statement that the expansion would promote its brand in
Iran. The carmaker sold an estimated 68,000 cars in Iran in the first six
months of this year, more than doubling its sales compared with the period a
year earlier. Renault said it now has about 10 percent of the Iranian market
Earlier in August, IDRO announced another joint venture, this time with
Transmashholding, Russiaís largest rail equipment supplier, to develop
Iranís dilapidated railway system. As part of the $2.5 billion deal, the
Russian company will own 80 percent of the joint venture.
Western companies, including Renault and French rival PSA, returned to do
business in Iran last year after an international deal to lift sanctions in
return for curbs on Tehranís nuclear activities.
Renault will be the majority shareholder (60%) of the new joint venture
company, formed with Iranian partners IDRO (Industrial Development &
Renovation Organization of Iran) and Parto Negin Naseh, an importer of
Renault products in Iran each taking 20%.
Negin Khodro has so far been Renaultís import arm in Iran, but following the
deal, the company will take a share in local auto production as well.
The new joint venture company will include an engineering and purchasing
center to support the development of local suppliers as well as a plant with
an initial production capacity of 150,000 vehicles a year, supplementing
Renaultís existing capacity of 200,000 vehicles a year in the country.
The first vehicles to be produced at the plant will be the new Symbol and
new Duster cars, added Renault.
IDRO Director Mansour Moazzami, Renaultís Executive Vice President Thierry
Bollore and Negin Khodro CEO Kourosh Morshed Solouk signed the deal at the
Ministry of Industries, Mining, and Trade.
ďWe are happy to sign this agreement with IDRO and Parto Negin Naseh
Company. In a rapidly expanding Iranian market, it was vital to implement
plants, engineering and purchasing center,Ē said Thierry Bollore, Member of
Groupe Renault Executive Committee and Chief Competitive Officer.
ďThis joint venture will enable an acceleration of our growth in this
country,Ē he added.
Bollore said Renault does not consider Iran a mere sales market. He added
that Iran is one of the most important strategic partners of Renault.
Moazzami announced that ď$780 million will be invested in the joint
production and 150,000 people will be employed.Ē
In addition to IDRO and Renault officials, Minister of Industry, Mine and
Trade, Mohammad Reza Nematzadeh was present at the event.
Payman Kargar, former Renault Iran director and current chairman of the
Middle East and India region of Nissan Group, also attended the signing
Models and Production Plant
Saveh, an industrial city 100 km south of Tehran, will be the new home of
The new facility will initially produce 150,000 units this year and then an
annual average of up to 300,000 vehicles, according to officials at the
Moazzami said the first joint venture car between IDRO and the French
automaker will be manufactured in 2018 at this site.
Based on the deal, Renaultís Kwid will be produced in Iran after much
The Kwid was originally created for the growing Indian market, but Renault
executives began hinting at its likely entry to Iran last year.
Initially launched in India in 2015, the model has been hotly anticipated in
the car community due to its low cost, which has been estimated to be in the
region of 300 to 350 million rials ($8,000 to $9,370).
Local Auto Parts Makers
Local auto parts makers will also be involved in the new Renault deal, with
15 firms already signing up to join the production venture. As sales ramp
up, an additional 45 companies will join the project.
Auto parts were rumored to be the sticking points, as the French carmaker
was previously reluctant to deal with local parts makers.
According to Bollore, Renault will set up an ďacademyĒ for training staff
and engineers as per the latest production deal.
The initial MoU was signed between Renault and IDRO in September 2016 in
Renault has had a bumper year in the Iranian market, as the statistics
released by the Ministry of Industry, Mine and Trade showed, by producing
42,686 cars in Iran in the first four months of the current fiscal (started
March 21), with the French brand claiming a 10.4% share of the local auto
Following the new joint venture, Renault is set to expand its market in
Iran. However, it is far behind Peugeot that had a 32.4% share of the
domestic car market during the period.
Iran Khodro (Peugeotís local partner) produces three Peugeot models, namely
206, 405 and 2008.
Overall, Peugeot manufactured 133,286 units of the three models that had a
63.5% share of IKCOís total output.
Both Renault and PSA reported last month strong first-half sales numbers
from their formal return to the Iranian market.
Iranís overall car production is expected to reach two million cars a year
by 2020, up from 1.2 million in 2016.