PSA Bolsters Production Base in Iran

PSA Peugeot Citroen and Iranian carmaker Iran Khodro say they will invest €400 million ($439 million) to upgrade their 50-year-old assembly plant outside Tehran.

PSA CEO Carlos Tavares tells reporters in Paris the deal is the first industrial agreement by a western company since international sanctions against Iran were lifted earlier this month.

The factory will begin making as many as 100,000 vehicles per year in late 2017, according to Bloomberg News. It says the plant will assemble Peugeot 208 supermini hatchbacks, 2008 mini-crossover vehicle and 301 compact sedans.

PSA withdrew from the Iranian market in 2012. But Iran Khodro continued to assemble older-model Peugeot-branded cars. Tavares says PSA vehicles account for roughly one-third of the Iranian car market. 

Tavares estimates there are some 3 million PSA cars on the road in Iran today. He figures the overall market, which shrank to fewer than 1 million units during the sanctions, could rebound to 1.6 million annual sales in two years and climb to 2 million vehicles in 2022.

PSA rival Renault SA exited the Iranian car market three years ago. It says it will now “intensify” its presence there through its Renault Pars venture with Iran Khodro and Saipa. The partnership already makes Renault’s Logan pickup truck and Sandero sedan.