PSA Hastens Iran Carmaking Revival as Tensions With U.S. Grow

  • Maker of Peugeot, Citroen autos sees opportunity versus rivals
  • French manufacturer to start SUV production in coming days

The maker of Peugeot and Citroen cars is seeking to speed up a return to Iran, taking an aggressive approach to beat rivals wary of mounting tensions between the country and the U.S. administration.

PSA Group will start building the Peugeot 2008 crossover near Tehran in the coming days, and plans to close a deal to make Citroen models in the next few weeks, said Jean-Christophe Quemard, who oversees PSA’s Middle East and Africa operations. PSA said a year ago that Iranian production under a new joint venture would begin in the second half of 2017.

“It’s the moment for us to accelerate,” Quemard told reporters Monday by phone. “It is clear that it will become even more difficult for American companies to operate” there in the future.

U.S. President Donald Trump put Iran “on notice” in early February following a ballistic missile test, and imposed economic sanctions on entities the U.S. said were linked to the missile program. PSA and French competitor Renault SA halted manufacturing in Iran over the past decade after earlier international penalties on the country over its nuclear policy. The main challenge for European firms operating in Iran is financing, as many of the continent’s biggest banks remain leery of running afoul of remaining sanctions.

Expanding to Iran was “extremely complicated” due to banks’ reluctance, Quemard said. He declined to specify PSA’s funding strategy for the new project beyond saying he didn’t work with French financial institutions.

Peugeot and Citroen vehicles are a common sight in Iran, where PSA had a presence for 50 years. Agreements with carmakers Saipa and Iran Khodro Co., PSA’s partner on the 2008 model and eventually on its 208 and 301 cars, allowed the French automaker to restore deliveries in Iran to its sales count last year. Paris-based PSA is looking at expansion in the country as part of an effort to reduce dependence on Europe, while it has less at risk with the U.S. than other large companies because it doesn’t sell cars there.

Iran’s new-car market will amount to at least 1.3 million vehicles in the 12 months through March, and 1.5 million units next year, Quemard said.

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