The accord signed last week between Iran and six other countries designed to curtail the former’s nuclear programme involves the lifting of certain restrictions on the trade of vehicles and automotive parts, which could be of particular advantage to carmakers with previous links to the country, including Renault, PSA Peugeot Citroën and Kia Motors. The announcement also bodes well for business amongst transport and logistics providers active in the region.
The deal was struck on November 24th in Geneva and involves the US, Russia, China, France, Germany and the UK. Part of it involves the suspension of sanctions imposed on trade in the automotive and aviation sectors, as well as on petrochemical exports and gold and precious metals.
Iran’s economy has been crippled by the sanctions and on its access to the global financial system. The cost to Iran in lost revenue since the sanctions were imposed in 2010 is estimated to be $120 billion, according to US Treasury estimates.
In terms of automotive trade, the easing of sanctions will restore $500m in lost trade to Iran over six months, according to officials from the Obama Administration quoted by news and analysis source Bloomberg.
French carmaker Renault has welcomed the joint plan of action but said it would be looking at the details before making any further announcement. "The first step is to study the deal closely," a spokesperson told Automotive Logistics. "We are monitoring the implementation of this agreement carefully and plan to resume operations accordingly as and when details become known."
Iran was an important market for Renault and rival French carmaker PSA Peugeot in terms of complete knockdown (CKD) exports and the prospect of renewed business could be welcome news given the continued slow performance in the European market.
Cost of withdrawal
Iran was PSA’s second biggest market for CKD exports and it was the top carmaker in the country, selling 458,000 vehicles there in 2011. When the company’s automotive division recorded an operating loss more than €1.5 billion ($2.04 billion) for the year in its 2012 financial results, the suspension of sales of CKD kits to Iran was among the factors.
Renault, meanwhile, built Logan and Megane sedans in conjunction with Tehran-based automakers Iran Khodro Company (IKCO) and Pars Khodro. It sold 103,000 vehicles there last year. Following its withdrawal later in 2012, Renault had to write off the value of its business in Iran, which hit the company’s profits in the first half of this year. First half operating income and expenses showed a deficit of €832m, of which €512m represented its entire exposure in the Iranian market.
However, share prices at Renault and PSA were seen to improve following the announcement of the Iran accord. Shares in Peugeot rose 4.45% to €10.68 this week and Renault’s shares increased 1.4% to €65.35.
Iran was also an important market for Kia Motors in terms of both CKD and finished vehicle exports. Prior to sanctions imposed by the South Korean government in 2010, it was exporting more than 4,000 vehicles to the country and more than 17,000 in CKD form for local assembly. Kia’s Pride hatchback accounted for between 30-40% of vehicles driven in Iran.
A spokesperson for Kia Motors said the announcement of the nuclear pact did not have any immediate impact of on its current business because it had yet to be notified by the related government parties about any consequent action on the easing of sanctions.
Logistics providers are also waiting to see how the situation develops and how trends in imports and exports are affected.
Grimaldi’s commercial and logistics director, Costantino Baldissara, who is also president of the Association of European Vehicle Logistics, said that finished vehicle logistics providers hoped to benefit from a pattern change “that definitively triggers new possibilities on the market”. He added that they would try to serve OEMs’ logistics plans by granting the right capacity for new potential flows.
International meeting for carmakers
Iran’s Ministry of Industry, Mining and Trade is holding an international conference for foreign carmakers in the capital Tehran on November 30th designed to revive its cooperation with them and introduce the capabilities of the automotive industry in the country. One of the stated aims of the conference is to discuss Iran’s potential as an export location for cars and parts to neighbouring countries, the Middle East, Asia and Europe.
Iran Khodro, Iran’s biggest carmaker with a 40% share of the market, which is a major sponsor of the conference, recently held meetings with the International Monetary Fund (IMF) to discuss the impact sanctions and the devaluation of its currency were having on its business.
