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French car firms take on US in race for Iranian market

The lifting of sanctions against Tehran has given French car makers an opportunity to re-establish themselves in the lucrative Iranian market, but they could find themselves overtaken by US rivals.


Iran will be hoping that the lifting of sanctions -- agreed as part of the landmark deal over its nuclear programme reached in Geneva this week -- will bring with it a much needed boost to the country’s economy.

But foreign companies around the world are also set to benefit from a resumption of trade with Tehran, not least France’s carmakers, who will be hoping to exploit the possibility of once again selling cars in Iran.

French auto companies used to be among the major players on the Iranian market, but they have suffered significantly in recent years from Western sanctions on trade.

PSA Peugeot Citroen once counted Iran as its second biggest market after France, shifting more than 400,000 vehicles a year by selling cars in kit form to Iranian partner Iran Khodro for assembly in Iran.

France’s other major carmaker, Renault, meanwhile, sold upwards of 100,000 cars in the country in 2012, also assembled locally.

French firms under US pressure

But PSA was forced to withdraw from the Iranian market in 2012 -- officially because the Iranian bank used by the manufacturer to manage its profits in the country was put on a US blacklist.

But many industry experts suspect that the exit was also the result of pressure put on the French company by US car giant General Motors, owner of a seven percent stake in PSA since February 2012 and with ties with the influential US anti-Iran lobby United Against Nuclear Iran.

Renault followed suit in 2013, writing off its Iranian business after a new round of sanctions imposed by Washington.

On Monday, a Renault welcomed the lifting of restrictions on trade with Iran.

“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 spokesperson for the company told AFP.

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

US firms in pole position?

But while the lifting of sanctions will give French auto firms the chance to re-establish themselves in Iran, they may find they are returning to a tougher market than the one they left, not least because of increased competition from US rivals.

In anticipation of thawed relations between Iran and the West, US firms have been sounding out the Iranian market for some time.

And in a move likely to grate PSA in particular, General Motors has for a number of months been actively courting the automotive industry in the country – including Iran Khodro.

According to French journalist Georges Malbrunot, GM “even launched a publicity campaign in several Iranian newspapers last year”.

“General Motors then exported a number of Camaros to Iran this summer, via Azerbaijan,” he wrote in an article for French Daily Le Figaro last month.

The company was able to exploit a loophole in US-imposed sanctions, which, while banning the export of car parts to Iran for local assembly, do not forbid the sale of whole vehicles in the country, said Malbrunot.

France ‘the real target of sanctions’

This has led to accusations by some analysts that the US deliberately used sanctions to eliminate foreign car companies from Iran in order to allow its own firms to exploit the market after the resumption of trade.

“France, the leading player in the market, was the real target [of the sanctions],” claimed political scientist and Iran specialist Michel Makinsky in an article for Le Monde earlier this year.

Washington was seeking to “purge” the Iranian market in anticipation of reaching an agreement with Tehran over its nuclear programme, he said.

Whether there is any truth to these allegations remains open for debate, but most analysts agree that the lifting of the sanctions could prove fruitful for the US, with its businesses well-placed to take swift advantage of the return to trade with Iran.

“Things could move quickly,” said Malbrunot in a blog post for Le Figaro on Thursday, pointing out that a US-Iranian Chamber of Commerce is already being set up in Tehran.

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