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Peugeot hit big by end of assembly kit sales to Iran.

The giant French carmaker Peugeot has suffered a huge drop in sales primarily because it has halted shipments of car kits to Iran.

But the firm, which is bleeding financially, says the loss of the Iranian market doesn't have much impact on its bottom line because Peugeot only wholesales the kits, it does not assemble the cars or retail them in Iran.

The cut off has had a devastating impact on Iran Khodro, which assembles the kits in Iran. Its sales have plummeted. But the entire car market is in depression in Iran, not just Iran Khodro, and carmakers blame the absence of financial support from the government. It isn't clear what that means, but it is probably the absence of hard currency with which to pay for imported parts.

Worldwide vehicle sales for PSA Peugeot Citroen fell 9.8 percent in the first half of this year, the company reported. But if the firm had been continuing its sales of car kits to Iran Khodro, the sales drop would only have been 1.1 percent.

The firm is France's biggest carmaker and Europe's second biggest.

In 2011, Peugeot sent 450,000 car kits to Iran. The car bodies were made in Iran along with a proportion of car parts. The cars were assembled in Iran by Iran Khodro, the country's largest carmaker, and retailed by Iran Khodro. Peugeot owned no part of Iran Khodro and was essentially just a parts supplier.

As a result, the firm said, while Iran accounted for 13 percent of the Peugeots sold in the world in 2011, the firm's revenue from Iran only amounted to 2 percent of the firm's global revenues.

The Iranian media have repeatedly reported layoffs by Peugeot, asserting that the firm's decline is due to the severing of its links with Iran Khodro. But Peugeot says the plant at Vesoul, France, that produced the car kits for Iran employed only 350 people for that work. Peugeot's main problem is declining sales in Europe.

European car sales are falling this year for the sixth consecutive year, and that is what has caused Peugeot to bleed financially, the firm says. Peugeot is hoping to be rescued by sales in China, Argentina and Algeria, where it has enjoyed growing markets and where it retails cars.

Peugeot has been selling kits to Iran Khodro since before the revolution. Most are for the model 405, which hasn't been sold in Europe in about 15 years, and the model 206, which was introduced in 1998.

Peugeot said it halted the car kit sales in March 2012 because US banking restrictions meant it wasn't getting paid regularly and it feared getting stuck. "It's getting harder for Western banks to work with Iranian banks, so we can't fund our operations," a spokesman said in 2012.

But many in France preferred to see a more sinister cause. Peugeot stopped the sales to Iran right after General Motors bought 7 percent of Peugeot. Many thought GM ordered the halt in Iran sales so it would not face US sanctions penalties.

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Publication:Iran Times International (Washington, DC)
Geographic Code:7IRAN
Date:Jul 12, 2013
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