What is the Difference Between Iran's Contracts with Peugeot and Renault?

After the nuclear agreement, two new contracts were signed between Peugeot Citroën on one side and Renault on the other with Iranian parties after several months. Although both contracts are joint ventures, there are fundamental differences between the Peugeot Citroën contract, which had imposed the harshest sanctions on Iran before the nuclear agreement, and Renault, which remained the only Western company in Iran despite sanctions. Peugeot Citroën is currently accused by some Iranian media of using its new contract to cover up a €427 million compensation owed to its Iranian partner. Fars reported that 'there is no mention of this compensation being paid by the French in the new contract between Iran Khodro and Peugeot.' Nevertheless, after nearly 30 years of presence in Iran's automotive industry, Peugeot has agreed for the first time to invest in a joint company with Iran Khodro. However, the management of this company is still equally divided between the parties, while the sales and after-sales service and production system are directly managed by Iran Khodro, with the French company only responsible for oversight and technology transfer. Critics argue that this situation allows Iran Khodro to maintain market control and evade providing adequate responses to customers during crises. They cite the widespread fires of Peugeot 405 vehicles in Iran, where hundreds of cars burned due to technical issues, as evidence that Peugeot sent a defective part to Iran Khodro, which failed to take necessary recall actions, while Peugeot would have acted to recall vehicles in similar situations in other countries. Currently, the Peugeot 206 and 207, the latest models in Iran, are offered at the lowest quality, with Peugeot having little oversight on their quality. According to the latest report from the Ministry of Industries, the quality of Peugeot vehicles produced by Iran Khodro has declined to the level of Chinese cars. In contrast, supporters of the new contract argue that Peugeot's stake in production will lead to greater sensitivity towards production compared to the past, and in the event of potential sanctions, it cannot easily leave Iran. Some believe that Peugeot's investment guarantees a 30% export of the products produced by the company in Iran. Carlos Tavares, the head of Peugeot Citroën, promised a 30% export of products produced in Iran during a press conference at Iran Khodro, stating that they aim to produce each region's products in that region, with Iran being a supplier of cars for Peugeot's markets in the Middle East. Despite these statements, opponents argue that Peugeot had made similar promises in the past but had even prevented the export of Iranian-produced Peugeots to northern countries. Furthermore, they believe that models 301 (produced in China) and 208, which are the basis for Peugeot's new productions in Iran, are three years old, and when production of these cars begins in Iran, they will effectively be outdated and have little capacity for export except to war-torn countries like Iraq and Syria, which currently buy Iranian Pride cars. The Citroën contract, Peugeot's partner with Saipa, has differences from the contract between Iran Khodro and Peugeot. The Citroën contract with Saipa can be considered more advanced than the Iran Khodro contract with Peugeot, as Citroën has agreed to purchase 50% of the shares of an Iranian manufacturing plant (Saipa Kashan), effectively entering the production process in Iran directly, unlike Peugeot. This factor may lead to better quality production from this company compared to its partner Peugeot in Iran Khodro, although the company will still be managed equally by Saipa and Citroën. This allows Saipa to manage the market through price changes, and effectively, the two companies, Saipa and Iran Khodro, can control the Iranian automotive market through behind-the-scenes negotiations. Previously, Payman Kargar, Renault's deputy in the Middle East, stated that Saipa's pressure caused the price of the Renault Sandero to be sold several million tomans higher because Saipa believed that if Sandero was sold below 40 million tomans in Iran, it would disrupt its market, especially for Chinese Brilliance models. He mentioned that if Saipa had allowed it, the price of this car could have been several million tomans cheaper than today. Perhaps for this reason, Renault has considered two strategies in its new contract: one is not to work with the two state-owned automakers in Iran, and the second is to engage in direct production in Iran. Accordingly, this contract has advanced one step further than the Citroën contract with Saipa. In its new contract, Renault is now directly dealing with the Organization for the Development and Renovation of Industries of Iran. The company 'Ben Ro,' which previously produced Fiat in Iran and was purchased by Saipa, will be transferred to the Organization for the Development and Renovation of Industries of Iran in exchange for Saipa's debt to the organization, and this site will serve as the production base for Renault's new cars in Iran. Regarding this contract, Mansour Moazemi, the head of the Organization for the Development and Renovation of Industries of Iran, stated, 'The Ben Renault company will be transferred as a debt from Saipa to the organization, and the contribution of the organization in the new contract is this; Renault will also invest cash in Iran. This company will bring in between $300 to $400 million in the first phase. The difference between this contract and previous contracts is that here design, engine, gearbox, production, and sales network will be carried out by Renault based on what Renault will have in Iran. Thirty percent of the produced products must also be exported.' As announced by Payman Kargar, Renault's deputy in the Middle East, the latest models of Renault in Iran, such as the new Duster (second generation) and the new Symbol (second generation), will be produced under this contract with high local content in Iran. He mentioned that these products are currently being designed and have not yet entered the global market. However, the most significant point of contention is the production of Renault's cheapest product, the Kwid. This car is currently considered the cheapest vehicle from a reputable company in the world, priced at nearly five thousand dollars. Iran Khodro claims to produce this car, while Saipa has reportedly negotiated for this vehicle but has not reached an agreement with Renault. However, in the latest statement, Mansour Moazemi, the head of the Organization for the Development and Renovation of Industries of Iran, stated that the production of this car will be under the new company between Renault and the organization. If this happens, it will mark the first time a new competitor enters Iran's automotive industry, disrupting the market dynamics. On the other hand, Volkswagen has also reached an agreement with the Mammut Group, which is currently engaged in producing heavy vehicles like Scania, to produce cars. However, the signing of this contract has been postponed until after the U.S. elections. If Volkswagen also reaches an agreement with Mammut to produce cars in Iran, alongside Renault and its new company, they will form strong competitors against Iran Khodro and Saipa, which have divided the market between themselves through behind-the-scenes management. This situation has prompted reactions from these two companies and led to criticisms from companies and managers close to them regarding Renault's contract with the Organization for the Development and Renovation. Currently, Saipa opposes the transfer of Ben Ro to the Organization for the Development, while Iran Khodro seeks to produce the Kwid in this company to maintain control over its pricing.