Renault took its battle
with Peugeot to Iran this week, returning after a 20-year absence to challenge its rival's dominance, despite moves to toughen sanctions against the Tehran regime.
The French carmaker began pre-sales this week for the Tondar-90, a locally manufactured version of the Logan, first made by Renault's Romanian subsidiary
Dacia. The Tondar - or "thunder" in Farsi - is set to roll off the production line in June, with 60 per cent of the car made domestically by Iran's top two car-makers, Khodro and Saipa.
Such is Renault's reputation from the 1980s, when it was the main foreign car on Tehran's streets, that buyers were queuing up this week, even though they were offered only basic pamphlets
and no photographs of the model.
"I don't know what kind of car it is, or what it looks like, but I suppose it's a good family car," said Hassan, a 45-year-old Iranian who paid 50.2m rials up front. He is hoping to have his new car delivered by June, when he will pay the rest: the total cost for different models will range from 82m rials ($8,870, £4,600, €6,765) to 108m.
Renault is seeking to take advantage of Iran's car market, which remains strong even though the country faces further United Nations sanctions over its missile and nuclear programmes and Washington has pressed European banks to curb
their role in Iran.
Demand for cars has grown as a result of cheap petrol
, which is set to increase from 9 to 11 cents per litre in June, the poor state of public transport, and the rapid growth of the middle class. Curbs on imports have at the same time made local manufacturing one of the country's most profitable non-oil industries.
Car production is set to top 1m in the Iranian year ending on March 20, with the industry accounting for
about 4 per cent of GDP and 500,000 jobs.
In a challenge to Peugeot - the biggest foreign car manufacturer in Iran, assembling 400,000 cars a year in partnership with Khodro - Renault has also decided to produce 15,000 Meganes, another small family car, in 2008, rather than importing the model from Turkey.
"Renault is entering Iran's market more strongly than Peugeot as the only foreign carmaker prepared to make a [serious] investment," said Saeed Leylaz, a former official at Khodro. Other foreign companies, including Peugeot, have tended to import components, rather than bringing in significant technology, he added.
Renault will provide a 51 per cent share of the $300m investment in the Tondar, and aims to make 300,000 cars over three years. The Tondar will be Khodro and Saipa's first common product, and local components in the car will rise to 80 per cent over three years.
The deal, signed in 2004, is Iran's biggest single foreign investment outside the oil sector. It was made possible by a new investment law approved
by the government of former President Mohammad Khatami that bypasses a constitutional rule limiting foreign partners to 49 per cent of any joint project.
Doing business in Iran can be complicated, however, and the Tondar project has been far from smooth
. Parliamentary deputies delayed progress by demanding a lower sale price and a higher export quota. In the end, it was agreed that 20 per cent of the 300,000 cars could be sold for export.
Some analysts suspect the car industry has its own interest groups and the opposition was motivated by a plan, which failed, to bring in Italy's Fiat.
Iran has long sought to become a regional carmaker by acquiring
modern technology and designs through links with giants such as Peugeot and Renault. Its export market has so far been limited to regional and some African countries. Parviz Davoudi, Iran's first vice-president, inaugurated a factory in Syria last week as a $60m joint venture to make 10,000 Samands, Khodro's budget family car, a year.