Iran's state-owned car manufacturer Iran Khodro unveils a Peugeot 207i, a locally-built version of the French automobile giant's 207 model, in Tehran on February 20, 2010
Iran's state-owned car manufacturer Iran Khodro unveils a Peugeot 207i, a locally-built version of the French automobile giant's 207 model, in Tehran on February 20, 2010 © Atta Kenare - AFP/File
Iran's state-owned car manufacturer Iran Khodro unveils a Peugeot 207i, a locally-built version of the French automobile giant's 207 model, in Tehran on February 20, 2010
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Romain Fonsegrives, AFP
Last updated: November 25, 2013

Carmakers eyeing a return to Iran after big deal

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French carmakers Peugeot and Renault look to be among the clearest beneficiaries of the interim deal that lifts some sanctions on Iran, with both hoping to leap back into the Middle East's biggest auto market.

One of the explicit concessions world powers made in the accord signed Sunday in exchange for Iran curbing its nuclear programme was the promise to "suspend US sanctions on Iran's auto industry".

For Peugeot and Renault, which had to pull out of Iran in 2011 and 2012 respectively, those words are worth big money -- especially as both are struggling in a languishing European climate.

PSA Peugeot Citroen was the top car manufacturer in Iran before the sanctions, selling 458,000 vehicles in 2011 in what used to be its second-biggest market worldwide after France. Its cars, most of them assembled by an Iranian partner firm and rebranded, are ubiquitous on Tehran roads.

Renault sold 103,000 vehicles there last year before leaving.

Iran itself counts car manufacturing as its second-biggest industry after oil, accounting for 10 percent of its gross domestic product.

Before the sanctions, there were 1.4 million new cars entering its market. After the sanctions, that number fell by more than a third -- but it still remains the biggest market in the Middle East, more than twice as big as Saudi Arabia.

PSA Peugeot Citroen "is closely following the development of the situation concerning Iran, but we are not about to resume our sales activities tomorrow," a company spokesman told AFP in Paris.

The effects of the Iran deal "are still unclear," he said. "The day when the sanctions no longer exist, we could look at how to return to our activities."

The caution shown by PSA Peugeot Citroen stemmed in part by the fact that it has US group General Motors as a partner. That relationship was seen as instrumental in it having to quit Iran despite the heavy operating loss of around a hundred million euros ($135 million) it represented between 2011 and 2012.

Also to factor in is the temporary and "reversible" nature of the deal with Iran, which is to apply for a six month period during which the Islamic republic and world powers will try to reach a permanent and comprehensive pact.

'Good news'

Renault, though, which counted Iran as its 8th biggest market by volume before the sanctions, was more enthusiastic.

"Renault is satisfied by the signing of this accord, which should allow the sanctions to be lifted. If the sanctions are lifted, our activity which is currently slowed could return to its normal course," a company spokeswoman said.

"It's good news for us because the Iranian market is important for us," she added.

On Monday, shares in PSA Peugeot Citroen soared 4.45 percent to 10.68 euros in afternoon trade, while Renault shares rose by 1.15 percent.

That reflected what Tangui Le Liboux, an analyst at the Aurel BGC brokerage, said was the "good news" the Iran deal brought the companies.

"The two French carmakers were the best placed among all their European rivals before the imposition of the embargo in recent years," he said.

The two companies will have the opportunity this week to renew their Iranian connections this week.

The French industry ministry has organised a conference on Saturday in Tehran bringing together all of Iran's car makers. Renault has confirmed to AFP it will attend. PSA Peugeot Citroen declined to comment.

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