Forbes | Dominic Dudley: On August 7, Renault signed a joint venture agreement with the Industrial Development & Renovation Organization of Iran (IDRO) and Parto Negin Naseh, a local vehicle importer. The new joint venture, in which Renault will be the majority shareholder, will produce up to 150,000 vehicles and engines a year in Iran, including the latest models of the Symbol and Duster.
The 660m ($780m) deal is one of the largest non-oil deals in Iran since sanctions on the country were lifted in January 2016. As such it will come as a welcome boost for the government of Hassan Rouhani, who has just begun his second term as president. Despite all the optimism surrounding the nuclear deal at the time, the country has struggled to attract the volume of foreign capital many inside the country had hoped it would.
[caption id="" align="alignnone" width="960"]
Thierry Bollore (R), deputy director of competitiveness at Renault, and Iran's minister of industry Mohammad Reza Nematzadeh attend a press conference following the signing of a deal in Tehran on August 7, 2017 for the French auto giant to produce 150,000 cars a year. (Photo: ATTA KENARE/AFP/Getty Images)[/caption]Renault is, like its main rival PSA (owner of the Citron and Peugeot marques), already active in Iran and has a production capacity of 200,000 cars a year there via joint ventures with the countrys two largest car companies, Saipa and Iran Khodro. Renault says it had a total market share of around 10% in the first half of this year, with sales over the six months of 68,365 double the sales it achieved in the same period last year.
With the extra capacity from the new deal, Renault will be in a strong position in a fast-growing market in which sales of new vehicles are forecast to reach 2 million by 2020, up from around 1.3 million last year.
The rapid expansion in the market explains the interest of international car firms in the country, although their actions have not been beyond criticism. Arecent articlein the Tehran business paper theFinancial Tribunecriticised French car firms for offering their Iranian customers the usual staple of outdated models at exorbitant prices.
The main problem for Iran is that companies like Renault and PSA are fairly rare and, overall, too few international companies have been willing to pour money into the economy.
Progress in the oil industry has been fitful, for example, although that has been as much because of the Iranian governments slow progress in finalising the terms of the contracts it was willing to offer international oil companies, known as the Iranian Petroleum Contract (IPC). That has now been nailed down, with Frances Total the first oil major to sign a big new deal, with a recent$4.8bn agreementon a development in the giant South Pars gas field. Other oil majors are thought to be close to following in its footsteps.
In other sectors major deals are generally still being talked about rather than signed. The National Petrochemical Company (NPC) for example says it is in talks for investments worthmore than $5bnwith international partners.
