Is Iran’s Auto Industry Becoming Dominated by the French?

21 June 2016 | 23:41 Code : 1960352 General category
Saipa and Iran Khodro, Iran’s auto manufacturing giants, have been engaged in negotiations with Renault and Peugeot to sell them subsidiaries. This can assure a long-term presence of the French auto industry in Iran.
Is Iran’s Auto Industry Becoming Dominated by the French?

(Picture: Peugeot 206 production line. The supermini car is a popular model in Iran where the market suffers low diversity.)

 

"While the talk of the day in Iran is the shutdown of Arj Company and death of its valuable brand, even larger companies and brands are put up for sale, but in silence.

 

Talks about the sales emerged after Pars Khodro CEO Nasser Aghamohammadi's interview with Wall Street Journal (link) in which he spoke of negotiations with the French auto maker Renault to sell a minority stake.

 

It was first Hassan Rouhani who in 2014 and during his visit to Davos spoke of Iran's intention to forge partnership between international companies and domestic automobile manufacturers through tempting offers. Later, in summer of 2014, news spread that Iran's second largest car maker Saipa's new strategy is to put its largest subsidiary, Pars Khodro, for sale. It was said that the automobile giant's board of managers has decided to sell 20% of Pars Khodro stocks at the first step, and has held negotiations with the French auto maker Renault to this aim.

 

Later, on the threshold of Hassan Rouhani's visit to France, informed sources claimed that French President Francois Hollande would personally discuss purchase of Pars Khodro by Renault and ask Rouhani to facilitate the deal. This was while Saipa, the parent company of Pars Khodro, was interested in selling only 20% of its shares.

 

In fall of 2015, Peyman Kargar, Renault representative in Iran and CEO of Renault Pars, argued that it would not be logical for Renault to buy 20 percent of Pars Khodro stock while the company is run by others. "We will either buy the entire Pars Khodro company or else, invest in its production lines to manufacture new Renault products." A few days ago, Kargar made more explicit statements on the subject. "We still want Pars Khodro" he said. "Renault will not dispense of Pars Khodro at any rate and whether it buys the company or not, it will continue production in this company."

 

Renault Aiming for Bonro

 

Still interested in independent operation in Iran, Renault has now aimed for Bonro, another Saipa subsidiary. Five months ago, Deputy Minister of Industry, Mine and Trade Mohsen Salehinia had stated that "under a joint venture scheme between Saipa and Renault, one of Saipa's subsidiaries, either Pars Khodro or Bonro, will be handed to the French auto manufacturer." Located in Saveh, central Iran, Bonro belonged to the private sector and assembled the Italian Fiat brand, but was later acquired by Saipa.

 

Peyman Kargar, Renault Pars CEO, announced three weeks ago that an MoU has been signed between Renault and Saipa, and the Iranian auto giant is ready to sell 60 to 80 percent of its Bonro shares to the French company. Kargar had also reported of negotiations with Saipa aimed to buy a part of Mega Motor Company, so Renault produces car engines inside Iran independently.

 

Half of Saipa Kashan Shares for Citroen

 

Among the four auto factories that Saipa owns inside Iran (Central, Pars Khodro, Saipa Kashan, and Bonro) Saipa Kashan is the youngest and most modern. Established in 2010, it has a capacity of manufacturing 150 thousand automobiles per year. Having plans to sell Bonro to Renault, Saipa is also floating the idea of selling Saipa Kashan to Citroen, Peugeot's smaller partner. A joint investment company between Saipa and Citroen is to be formed, with shares halved. Saipa brings Saipa Kashan into the joint venture, while Citroen will introduce technological knowhow and a modest investment in redesigning the production line. Citroen, whose automobiles are entirely based on Peugeot platforms, aims to acquire Saipa Kashan and turn it into the permanent hub for manufacturing Citroen automobiles in Iran. That means the Peugeot-Citroen group will use Iran Khodro and Saipa as its arms to control Iran's automobile market.

 

Renault's Insatiable Appetite

 

Interestingly, Renault's insatiable appetite to acquire Iranian companies has also targeted Iran Khodro [traditionally a partner for the other French giant, Peugeot.] In his interview published on Wednesday, Peyman Kargar addressed the question on negotiations between Renault and Iran Khodro as such: "what we are telling Iran Khodro is that if they bring one of their factories into the joint venture, we will also make a heavier investment into production of new products in this company."

 

Seventy Percent of Iran's Khodro Product Basket under Peugeot Brand

 

Even with no new deal with the French, seventy percent of Iran Khodro products are already manufactured under Peugeot brands. Besides factories designated to make new Peugeot products in Iran, other Iran Khodro companies will continue assembling French cars. The story is the same for Saipa.

 

It seems that Iranian auto makers are silently morphing into French auto makers. Although a large share of production in Iran's auto industry belonged to French brands even in previous years, the new development is transfer of auto factories' ownership to the French who can then be assured of a long-term domination in the Iranian market.

 

* This piece was originally published in Tasnim, a news agency affiliated with IRGC.

tags: Renault peugeot Saipa Iran Khodro Iran's automobile industry


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