French car giant Peugeot-Citroen races back into Iran market in $450m deal

French carmaker Peugeot-Citroen (PSA) announced on Tuesday that it will be returning to Iran as part of a €400m ($450m) deal.

It is hoped that the 50-50 joint venture with its old partner Iran Khodro in Tehran will see the first cars go on sale as early as next February with 200,000 vehicles being rolled out a year within two years. 

Peugeot-Citroen is the first western carmaker to announce a return to Iran following the signing of last year’s nuclear deal and the easing of many economic sanctions. Iran was Peugeot-Citroen’s second-largest market before the car giant was forced to pull out due to increasing sanctions in 2012.

“Today is the comeback of PSA to Iran. We are very proud,” Jean Christophe Quemard, who oversees PSA’s Middle East and Africa operations, told Reuters.

“This company is committed to Iran and through this Iranian company we show that we are really committed for the future and ready to invest in this country.”

Iran is seen as having a highly lucrative automobile market as it has a large middle class but relatively low levels of car ownership due to decades of restrictions and sanctions. Currently, only one in every 100 Iranians owns a car, six times less than in the European Union.

The announcement comes just days after Iran said it has reached a billion-dollar deal with American engineering firm Boeing of up to 100 airplanes.

Iran’s airlines have been particularly hard-hit by US sanctions since the 1979 Revolution to overthrow the Shah with US firms not selling any airplanes or airplane parts to Tehran for decades. The deal, however, will “be contingent on US government approval,” Boeing told the Guardian.