News ID: 239159
Published: 0318 GMT February 20, 2019

Russia's AvtoVaz in talks to produce cars in Iran

Russia's AvtoVaz in talks to produce cars in Iran

Russia's largest carmaker AvtoVaz is negotiating the assembly and sale of its cars in Iran where there is massive pent-up demand for new automobiles.

Viktor Kladov, director for international cooperation and regional policy of Russian state conglomerate Rostec, said on Wednesday, "Negotiations are underway with a number of countries, such as Iran."

According to Russian TASS news agency, he further said on the sidelines of the AERO INDIA 2019 exhibition, "I mean both the sales and the assembling."

AvtoVaz, majority-owned by France's Renault and its alliance partner Nissan, produces Russia's best-selling Lada brand.

Renault-Nissan has a 67.1 percent stake in the holding company that controls AvtoVAZ. The French company initially bought 25 percent of AvtoVaz in 2008 for $1 billion.

Nissan runs a plant with a capacity of 100,000 light vehicles a year in St. Petersburg. PSA Peugeot Citroen, together with Mitsubishi, runs a plant in the region of Kaluga with a capacity of 125,000 cars a year.

Both Renault and its competitor Peugeot-Citroën put their development in Iran on hold after new US sanctions went into effect in August. Other Western firms, including German car and truck manufacturer Daimler, also dropped plans to expand their Iran business.

PSA had signed production deals worth €700 million, while Renault had announced a new plant investment to increase production capacity to 350,000 vehicles a year.

Earlier this month, Renault set a weaker full-year profit goal on the combined effect of withdrawal from Iran and setbacks over CEO Carlos Ghosn's forced resignation last month over financial misconduct allegations.

Iranian vehicle manufacturer and dealer Iran Khodro was hoping to finalize a deal with Nissan for production of low-budget Datsun cars but the plan was apparently halted due to US sanctions.

Peugeot manufacturer PSA and Renault moved swiftly to sign new production deals to upgrade their pre-sanctions partnerships in Iran after the West joined other countries to reach a nuclear deal with Tehran in 2015.

President Donald Trump unilaterally withdrew the US from that deal in May and reimposed as sanctions on Tehran.

Russian automakers are struggling to meet their government's desire for domestic brands to challenge the dominance of Western cars. AvtoVaz has fought hard in recent years to dispel the poor Soviet-era reputation of its top-selling Lada brand.

In 2017, Russian car sales totaled 1.75 million units, up 10 percent from the previous year, but still only around half of the nearly three million units sold in 2012 when the market was booming.

For AvtoVaz and its likes, Iran's massive auto market offers a fertile ground for development and expansion in the absence of Western rivals.

Chinese carmakers are already making their presence felt, with a new dealership for automaker Chery recently setting up shop in Tehran.

Iran, home to more than 80 million people, has a huge demand for automobiles. According to Ministry of Industry, Mine and Trade, the country produced more than 1.5 million cars only in 2017, up some 14 percent from the year before.

Iran Khodro and Saipa control some 90 percent of market share, assembling Peugeot-, Renault- and Kia-branded vehicles from kits, in addition to Chinese cars in much lower numbers.

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