Iran Nuclear Agreement Drives French Automobile Manufacturing Deal

Iran has signed a €660 million ($780 million) contract with the French automobile giant Renault to produce over 150,000 cars per year in the country.

According to the deal signed on Monday, Renault will collaborate with Iran's Negin Khodro Company (also known as Naseh Parto) and the Industrial Development and Renovation Organization (IDRO) to produce the latest versions of Renault's Symbol, Duster and Kwid models. Renault will also establish customer service centers and auto part retail shops in Iran. A memorandum of understanding was signed between Renault and IDRO in September 2016 in Paris.

“Sixty percent of the shares of the partnership would belong to Renault and the rest to Iran,” IDRO Chairman Mansour Moazzami said, adding that Iran’s 40 percent stake will be split evenly between IDRO and Negin Khodro, the latter having been Renault’s import arm in Iran.

The manufacturing facility will be based in Saveh, located 120 km from Tehran, and owned and operated by a joint venture. The agreement stipulates that 150,000 cars will be manufactured this year and an annual average of 300,000 subsequently.

In June 2016, the French car manufacturer PSA Group signed a deal with Iran’s biggest automaker Iran Khodro to produce 200,000 Peugeots per year in Iran. PSA signed another deal with Iran Khodro’s chief competitor, SAIPA, to produce a similar number of Citroen cars. 

Renault and its French rival PSA Group were some of the first European companies to take advantage of investment opportunities in Iran, after nuclear-related sanctions were lifted in January 2016 as required by the Joint Comprehensive Plan of Action (JCPOA), an agreement reached between Iran and the five permanent members of the UN Security Council plus Germany. Renault has already signed deals with Iran Khodro and also Pars Khodro, a subsidiary of Iran's second largest automaker SAIPA.

“We 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,” said Thierry Bollore, Renault's chief competitive officer, at the signing on Monday.

Iran produces about 1.35 million automobiles a year, though authorities expect that number to rise to two million by 2020 and hope the market grows to three million per year by 2025. There are around 30 car manufacturers in Iran, most of which assemble Chinese and Korean brands. Renault sold 68,365 vehicles in Iran in the first half of 2017, giving it a 9.7 percent share in the market.