Renault would end state domination in Iran’s car market

Business Materials 3 April 2017 19:53 (UTC +04:00)

Baku, Azerbaijan, Apr. 3

By Farhad Daneshvar – Trend:

The last Iranian calendar year (March 20, 2016-March 21, 2017) was remarkable for Iran’s automotive industry.

While the output of the Iranian carmakers saw a huge surge over the last year, the country made a breakthrough in sealing agreements with the international leaders of the industry in a bid to develop its sub-standard automotive sector.

Iran’s car output reached 1.165 million units in 2016 indicating an 18.6-percent rise versus 2015, which, according to the International Organization of Motor Vehicle Manufacturers (OICA), appears to be the highest rate of growth in output among car manufacturers in the world.

Coming to cooperation with international leaders of the industry, Mercedes-Benz, Peugeot, Renault, Citroen, Scania AB and Hyundai Motor Company were among those automobile manufacturers who reached agreements to do business with Iranians and some others such as Volkswagen and Skoda Auto made breakthroughs in negotiations to enter the Middle Eastern nation’s huge car market.

In addition, the Islamic Republic launched cooperation with German and Belgian companies for producing vehicle engines and gearboxes.

Some experts describe the deals with France’s Peugeot and Citroen as significant agreements of the largest non-oil sub-sector of Iran’s economy, the automotive industry, concluded over the last Iranian calendar year.

Among all those signed documents, a memorandum of understanding (MOU) inked between the Industrial Development and Renovation Organization of Iran (IDRO) and Renault shines out.

Concerns grow over domination of state-run carmakers in Iran

Concerns grow over domination of state-run carmakers in Iran

The MOU, which is expected to become a firm contract over the coming two weeks, will pave the way for Renault to directly engage in business in Iran. Under a possible agreement, a new automotive engineering center will be launched in the country to help domestic spare part makers. In the meantime, Renault will operate a plant with an initial capacity for producing 150,000 cars in the Islamic Republic.

According to the IDRO, Renault takes a 60 percent share in the partnership, investing about $300 million in the first phase. While Renault is obliged to design and produce engines as well as gearboxes in Iran, the agreement envisages exporting 30 percent of its products.

The agreement is significant as an international company for the first time in Iran will produce and supply its products without any links to the Islamic Republic’s two largest state-run carmakers, Iran Khodro and SAIPA, who have dominated the country’s car market in the absence of international rivals.

So, in case the sides succeed in realizing the plan, a third player will enter the country’s car market captured by the state-backed carmakers, Iran Khodro and SAIPA.

The 2016 sales of Renault in Iran skyrocketed by 110.7 percent to give the French carmaker an 8.4 percent market share.