Will the Major European Automaker Stay in Iran?

Peugeot-Citroën has made the largest investment in Iran's automotive industry following the JCPOA. Now, after the U.S. withdrawal from the JCPOA, the question arises whether this automotive group will remain in Iran. Peugeot-Citroën was one of the first companies to call for the European Union to take an independent stance towards the U.S. in a statement after the U.S. exit from the JCPOA. A week after the U.S. left the JCPOA, the group began selling its second product in Iran. The Peugeot-Citroën group currently includes five brands: Peugeot, Citroën, DS, Opel, and Vauxhall. The production of the group's first product, the Peugeot 2008, began last year in Iran after some delays and has now reached about thirty percent local production. The production of the group's second product from the Citroën brand, named C3, started this year, and Citroën began selling this vehicle in Iran on May 16, just a week after the U.S. exit from the JCPOA. This sales launch could be the first sign from a European automaker that it will continue to operate in Iran as long as Europe is aligned with it, even if the U.S. withdraws from the JCPOA. The Citroën C3 can be considered the most modern product in Iran's automotive industry. This product is currently being produced in Europe and is among the best-selling products in its class. This car was among the seven selected cars of the year in Europe this year. However, the model produced in Iran uses a different engine from the European version. This engine is the strongest engine that Citroën has placed on this vehicle and is more powerful than the engines of the European versions. It is a 1600 cc engine that has been jointly designed by Peugeot-Citroën and the German automotive group BMW, and it has also won the engine of the year title in its class. The use of this engine alongside the production of the most modern product of the Peugeot-Citroën group in Iran indicates that this group's perspective on the Iranian automotive market is different from the past. This company, which sees the Iranian market lost to its compatriot Renault and Chinese competitors, is now seeking to regain its credibility. The 'blow' to the quality reputation of Peugeot-Citroën in Iran after sanctions: In 2010, part of the shares of the Peugeot-Citroën group was purchased by General Motors of the U.S. This factor and the lack of investment by Peugeot-Citroën in Iran caused Peugeot to be the first Western company to leave Iran when nuclear sanctions began in 2012. Meanwhile, Renault, Peugeot's French competitor, did not leave Iran even under the toughest sanctions and continued its production in Iran. This led Iran Khodro to indirectly continue producing the Peugeot 206 by sourcing parts from second-tier Chinese suppliers. Continuing the production of Peugeot 206 products without Peugeot's oversight and with low-quality parts harmed the reputation of this company among Iranian customers. After the JCPOA, this company attempted to return to Iran amidst a very negative atmosphere towards the Peugeot-Citroën group and to regain its lost market; however, this time it did not face issues with General Motors since General Motors had sold its shares in Peugeot-Citroën. On the other hand, this company had returned to profitability in Europe with the introduction of its new products. Nonetheless, the Iranian side was not willing to cooperate with this group in Iran without investment from Peugeot-Citroën. Ultimately, with the acceptance of this condition, the Peugeot-Citroën group invested in Iran, which so far is considered the largest investment in Iran's automotive industry after the JCPOA. Peugeot-Citroën's investment in Iran: Initially, Peugeot signed a contract with Iran Khodro, and then Citroën signed a contract with Saipa. Accordingly, Peugeot for the first time entered the Iranian automotive industry through direct financial investment. Iran Khodro and Peugeot formed a joint company named IKAP with equal 50% ownership from both parties. The production of 200,000 new vehicles per year, including models 208, 2008, and 301, is among the agreements made between the parties, with 30% of this amount to be exported to Peugeot's sales network. Jean-Philippe Imparato, CEO of Peugeot, announced that Peugeot France, with a 400 million euro investment, is the largest European automaker to invest in Iran after the JCPOA. He even traveled to Iran after Donald Trump's victory in the U.S. presidential election. At that time, the CEO of Peugeot responded to a question from reporters about how the election of the new U.S. president would affect Peugeot's activities in Iran, saying, 'We have organized our cooperation with Iran Khodro based on legal and completely permissible frameworks and are committed to our partner in Iran. We want to help our Iranian partner in becoming an automaker and are trying to transfer technology and localize this knowledge in Iran.' However, Citroën went beyond Peugeot's contract and was willing to buy shares of an Iranian factory for the first time since the revolution. Citroën established a new joint venture named Saipa Citroën for the production of its products in Iran. Saipa's contribution is 50% of the shares of Saipa Kashan, and thus 50% of the shares of Saipa Kashan were transferred to Citroën at the official appraisal price in Iran. But will these investments yield results? Will Peugeot-Citroën have to leave Iran again like last time? The answers to these questions initially depend on the European Union's approach to the JCPOA. If Iran remains in the JCPOA and the European Union provides the necessary guarantees to its companies, there is little likelihood that Peugeot-Citroën will leave Iran. On the other hand, the likelihood of Peugeot-Citroën remaining in Iran is higher than that of other European companies, as this company does not have much of a market in the U.S., although it has announced plans to return to the markets of the U.S., Canada, and India in the coming years. Furthermore, unlike before, General Motors does not hold shares in this company, and with this group's extensive investment in Iran, Peugeot-Citroën effectively sees part of its capital at risk if it leaves.