Renault Signs Major Iranian Auto Deal, as Western Firms Deepen Push -- Update

By Matthew Dalton in Paris and Asa Fitch in Dubai Features Dow Jones Newswires

French car maker Renault SA is set to open a new factory in Iran, in the latest sign of deepening Western business ties with Tehran following the lifting of sanctions.

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Renault said Monday the factory would produce 150,000 vehicles a year, in a joint venture with state-owned Iranian conglomerate Industrial Development & Renovation Organization, or IDRO, and Parto Negin Naseh, which imports Renault vehicles to Iran.

The deal, which the head of the IDRO said was worth about EUR660 million ($777 million) in its first phase according to Iran's state news agency, comes on top of Renault's existing joint venture in Iran. Renault declined to comment on the deal's value.

The agreement is the latest in a wave of deals by Western corporations following the 2015 nuclear accord, with European companies so far appearing more active than their U.S. counterparts.

European energy and infrastructure giants, including Germany's Siemens AG and France's Total SA, have reached major deals in Iran since the lifting of sanctions, defying a push by the Trump administration to penalize Iran over its ballistic-missile program.

Against a backdrop of renewed sanctions pressure under President Donald Trump and Congress, American investors have been skittish in their approach to the Iranian market.

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The Trump administration imposed its latest round of sanctions last month, and Congress passed additional sanctions targeting Iran, Russia and North Korea. Mr. Trump signed that bill on Wednesday.

Under the deal announced Monday, Renault will be the majority shareholder in the venture after an initial period of joint control. It announced in September plans to form the new venture, but only fully disclosed the partnership structure Monday.

Cars will start entering the country late in the next Iranian year, which ends in early 2019, IDRO chief Mansour Moazami said. The Iranian calendar runs differently to the Western one.

In addition to the vehicle plant, Renault said an engine plant with a capacity of 150,000 units a year is also planned. The facilities will be in Saveh, 70 miles south of Tehran.

Renault has 60% of the shares of the venture, with the remaining 20% with IDRO and 20% with Parto Negin Naseh, according to the Islamic Republic News Agency. The deal would create 3,000 jobs, it added, and Renault would provide distribution, sales and after-sales services.

Renault already had capacity to build 200,000 vehicles a year in Iran before the new production deal, but its expansion had been slowed by sanctions before the nuclear accord.

In Jan. 2016, Western powers and the United Nations lifted penalties intended to block Iran from developing a nuclear weapon, after confirming the country was sticking to the initial terms of the 2015 accord.

Since the deal, western firms have moved in. Last month, Total said it would sign a deal to complete a $1 billion investment in an Iranian gas field as part of a partnership with China National Petroleum Corp. and an Iranian company.

Shortly after sanctions were lifted, French auto maker Peugeot launched a EUR400 million joint venture with Iran Khodro, Iran's biggest car maker, which aimed to make 200,000 cars a year. Citroën also signed a more-than EUR300 million deal with Iran's SAIPA in October.

Renault has seen sharp growth in Iran, doubling its automobile production in the country to 68,365 in the first half of 2017 compared with a year earlier. That growth helped Renault boost its share of the Iranian market to 9.7%.

Write to Matthew Dalton at Matthew.Dalton@wsj.com and Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

August 07, 2017 12:03 ET (16:03 GMT)