Competition from Mercedes-Benz to Volkswagen for Entry into the Iranian Market

Foreign companies have entered a major race to enter the Iranian market following the lifting of sanctions, with German and French companies being the most prominent competitors. Hashem Yekeh Zareh, CEO of Iran Khodro, emphasized: "The Iran Khodro Industrial Group has adopted a completely different approach in this new round of international cooperation, focusing on the presence and joint investment of the counterpart." If this statement by the CEO of Iran Khodro comes close to reality, it can be said that the manner of foreign companies' entry into Iran this time will be fundamentally different from before the sanctions. Before the sanctions, during Mahmoud Ahmadinejad's presidency, no foreign company was willing to invest directly in Iran, and even during Mohammad Khatami's presidency, only two companies, Renault and Mercedes-Benz, were willing to invest in Iran. Renault was willing to invest 51% in the so-called L90 project with an investment volume of $1.5 billion. This investment faced execution challenges during Ahmadinejad's presidency, and his government halted the project's implementation for two years. After the investment was initiated, Renault, fearing the situation, was only willing to implement part of its program for Iran and pursued the rest of its plans in countries like India, Russia, and Romania. Mercedes-Benz also invested in passenger and heavy vehicles in Iran during Khatami's presidency; for example, the company increased its capital in IDAM for producing Benz engines and directed ZF Germany towards investing in Iran for producing Benz gearboxes. The company also made a direct investment by fully acquiring shares of Star Iran for producing the E and C class Mercedes. However, with Ahmadinejad's government coming to power, the project failed after a while, and shortly before the sanctions were imposed, the company left Iran. Now, just before finalizing new contracts with Renault and Peugeot, and less than 48 hours after the lifting of sanctions, the German holding Daimler, owner of Mercedes-Benz, signed the first memorandum for the renewed production of its products in Iran with Iran Khodro Diesel. In this memorandum, Mercedes-Benz is set to invest directly in Iran and establish a joint company with Iran Khodro Diesel. The change in the Iranian automotive industry’s approach to pressure foreign companies is such that Peugeot is willing to make extensive investments in Iran to avoid losing its market, something it had not been willing to do for 20 years before the sanctions. During that time, with Iranian investment and by selling licensing rights and parts, it held a large part of the Iranian market for years. In 2012, Peugeot left Iran due to global sanctions and the purchase of about 8% of its shares by General Motors. Because Peugeot had not invested in Iran, it was able to exit without financial loss, while the Iranian side had spent millions of dollars on building the infrastructure for Peugeot products. Recently, one of the significant pressures exerted by the Iranian side on Peugeot has been the compulsion to invest in Iran. The CEO of Iran Khodro announced that the condition for new cooperation with Peugeot is direct investment by this French company, stating: "Iran Khodro has announced its new conditions in recent negotiations with Peugeot France, which include Peugeot's 50% investment with Iran Khodro and turning Iran into a center for exporting cars to regional countries, which the officials of this company have accepted." Citroën, following its larger sibling Peugeot, is also looking to start its cooperation with Saipa. The Citroën Elysee, after the Xantia and the AX, is the third important car from Citroën that is set to be produced in Iran. Over 70% of the production of this chassis will be carried out in Iran Khodro, and part of the components needed by Saipa for the Elysee will also be supplied by Iran Khodro. The production of the Citroën Elysee will be within the framework of a strategic cooperation of the Peugeot Citroën Group for producing the "C-class" chassis of this French group in Iran. According to the Peugeot Citroën Group's plan, this class in Iran will include Peugeot 208, 2008, 301, and Citroën Elysee cars. A total production volume of about 200,000 units is planned for these vehicles to make the production of such products economically viable in Iran. However, an important point regarding the Elysee and Peugeot 301 is that both products are produced in China at the "Dongfeng" company. Although the price of these products is around 10 to 12 thousand euros, their price in Iran is expected to be over 60 million tomans. The Elysee is actually very similar to the Citroën "C-3" produced for the Western European market. In contrast, the Peugeot Citroën Group, Renault also has extensive plans for Iran. Renault intends to produce the Kwid, which is the company's cheapest product, in Iran and introduce it as a replacement for the Pride. The company is looking to buy a car manufacturing plant in Iran. It has conducted negotiations to purchase a northern Iran Khodro plant and the Pars Khodro company from Saipa. However, according to Peyman Kargar, Renault's director in the Middle East, both Saipa and Iran Khodro are not willing to sell the plant. Recently, Peyman Kargar announced that Renault intends to introduce this product to the Iranian market at a price of 25 million tomans. Apart from this, Renault is also looking to establish its main vehicle design center in Asia in Iran. On the other hand, the company is also seeking to buy a factory in Iran for producing its new engines and gearboxes. The models Renault Clio 4, Renault Captur, Renault Duster, and Renault Megane are among the new models of this automaker that are set to be produced in Iran. The company aims to cover the Middle Eastern market with its productions from Iran. Besides these automakers, Volkswagen is also engaged in intensive negotiations with Iranian parties. Several news agencies in Iran have reported that 250 applications have been sent from Iran for cooperation with Volkswagen. It has been said that in addition to Iran Khodro and Kerman Motor, the Fardous family in the form of Mamoot Company, the Gharami family representing Atlas Khodro and Asan Motor, the Dilami family, as owners of LG Iran and importers of MG cars, the Chabahar automotive group, and several other companies have also applied for cooperation to produce some of this company's products. This global automotive giant owns brands such as Volkswagen, Audi, Bentley, Bugatti, Lamborghini, SEAT, Škoda, MAN, Scania, Porsche, Italdesign, and Ducati. It is likely that several companies from this group will enter into cooperation with Iranian parties. Iran Khodro has also announced that it has conducted negotiations with Škoda and Volkswagen.