Iran's Automotive Industry and Collaboration with Designers from Germany and France

Hashim Ikhzar, the CEO of Iran Khodro Industrial Group, stated that negotiations with foreign automakers are progressing and mentioned that in addition to Peugeot-Citroën, Iran is also negotiating with a non-Asian automaker. He expressed hope that good developments would occur in Iran's automotive industry within the next four to five months. The CEO announced that the goal is to become an automaker and added that to achieve this, they need to leverage the experience of renowned global designers. Accordingly, individuals with up to thirty years of experience working with automakers like Mercedes and Volkswagen have been engaged. Mr. Ikhzar mentioned that two design groups from France and Germany have signed contracts with Iran Khodro, with the German group expected to start work in Iran within two to three months and the French group within two weeks. The CEO did not provide details about the type of contract with Peugeot-Citroën, which he stated would be a joint venture. Radio Farda interviewed economist Jamshid Asadi in Paris regarding this type of economic collaboration: "A joint venture is a company formed with mixed capital from a foreign company and a domestic company, meaning that the foreign and local partners collaborate for an economic activity, usually on a fifty-fifty basis." When asked if this type of contract would benefit Iran, Asadi replied: "A mixed company with a foreign partner brings in capital at a time when we have very little capital in the country, as almost nothing remains in the currency reserve fund and the National Development Fund after Ahmadinejad's presidency. Secondly, they bring technology at a time when we have been severely lagging behind updated technologies for thirty years. Thirdly, they bring the market, significantly." Before the announcement of the agreement between Iran Khodro and Peugeot-Citroën, the operational manager of the French company had stated in Tehran on December 1 that they were in serious negotiations to resume their activities in Iran. Meanwhile, according to the newspaper Donya-e-Eqtesad, Mohammad Reza Nematzadeh, the Minister of Industry, Mine, and Trade, also spoke on December 1 in Tehran about the state of the automotive industry in Iran, mentioning Tehran's condition for transferring part of the shares of Iranian automakers to foreign companies. He added that this would occur only if 30% of the products produced in Iran are exported. The Minister also stated that Iran should become the fifth-largest automaker in Asia and the first in the region. Jamshid Asadi commented on the feasibility of achieving this goal, as outlined in the Horizon 1404 plan, saying: "Iran has not yet emerged from the sanctions. The price of the dollar and euro has risen again in the Iranian market. This means that investors are not investing in the country. They are worried and looking to move their capital out, and the easiest way to do that is to buy foreign currency. Why? Because the hope they had for reaching an agreement in November did not materialize and has been pushed to around June. Therefore, the sanctions have not been lifted yet. I do not know how a foreign company like Peugeot can make a heavy investment in Iran under these conditions and also commit to opening Middle Eastern markets to Iran, as Mr. Nematzadeh points out. I find this unlikely." This economist also pointed out some past actions, such as selling Iranian cars to friendly countries at low prices using government subsidies, noting: "You cannot compete with subsidies. This harms the country's economy because it takes away competitiveness from the economy and creates a veil that hides the fact that the country is not competitive. How long can this be kept hidden? It cannot be hidden everywhere. This is a crime. It is an economic crime, and at a time when we want to emerge from sanctions, we risk facing another sanction due to the fraud we committed." French automotive activity in Iran was halted in March 2012 following the imposition of Western economic sanctions against Tehran due to its nuclear activities.