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Wed 22 Jun 2016 09:28 AM

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French carmaker PSA clinches $451m Iran Khodro deal in bid to rebuild sales

50-50 JV will between state-owned Iran Khodro and the maker of Peugeot and Citroen cars will invest in new production, research and development

French carmaker PSA clinches $451m Iran Khodro deal in bid to rebuild sales
Deputy of Frances Peugeot Citroen (PSA) Jean-Christophe Quemard (R) and Hashem Yekkeh-Zareh (L), the CEO of industrial group Iran Khodro, an old partner of PSA, exchange documents after signing a 400 million euro joint venture as Iranian Industry and Commerce Minister Mohammad Reza Nematzadeh Mohammad Reza Nematzadeh watches on in Tehran on June 21, 2016. (Atta Kenare/AFP/Getty Images)

French carmaker PSA Group said on Tuesday it had finalised a production deal with state-owned Iran Khodro, preparing its return to the Middle East's biggest auto market.

The 50-50 joint venture will invest up to 400 million euros ($451 million) over five years in new production, research and development, the maker of Peugeot and Citroen cars said, under the terms of an outline deal announced in January.

PSA and other western carmakers including Renault and Volkswagen have been pursuing Iran sales and manufacturing agreements since a breakthrough deal last July to curb Tehran's nuclear programme in return for the lifting of international sanctions.

The production venture will assemble Peugeot's 208, 2008 and 301 models in Iran, starting in the latter half of 2017.

Iran Khodro, the country's largest carmaker, disclosed in February that PSA had also agreed to pay $446 million in compensation for losses incurred after the French carmaker abruptly withdrew from a previous co-operation deal in 2011 under US pressure.

PSA, once Iran's top-selling carmaker, wants to rebuild its share of a market in which Asian rivals have since made inroads. The French carmaker's sales peaked at 458,000 vehicles before its withdrawal, or nearly 30 percent of the Iranian market.

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