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Peugeot Signs Agreement With Iranian Carmaker

By Adam Gonn, The Media Line news agency

Iranian auto manufacturer, Khodro, will be allowed to produce the Peugeot 207 series for export following agreement.

Iran Khodro Company, which is the largest carmaker in Iran with almost 65% of the country's domestic vehicle production, has signed an agreement with the French carmaker Peugeot to produce 5000 cars of its popular small car model, the 207.

Marc Bocque, a spokesperson for Peugeot, confirmed the deal when contacted by The Media Line.

The cars will be exported to 63 different countries globally, mainly Russia, Ukraine, Bulgaria, Belarus and Serbia, as well as Central Asian, Northern African and Gulf countries, according to Khodro.

The deal is not the first time that the two companies have cooperated. The Samand, sometimes referred to as the Iranian national car, is based on Peugeot's mid size 405 model.

Khodro in addition produces cars under license from the German car-giant Mercedes-Benz and the Japanese Suzuki.

While the Iranian government's trade tariffs on importing foreign cars into Iran have helped Khodro establish itself as the number one carmaker in the country, reports of inefficiency, a $9 billion debt and risks of bankruptcy abound.

In august, a government backed bailout worth $1 billion, due to have been financed by sale of the central bank's stock was stopped by Iranian President Mahmoud Ahmadinejad.

"The problem is that the factory has been weakened financially from having been subsidized for so long by the government," Emad Honarparvar, CEO of Iran's Import-Export Business Directory, told The Media Line on the reason for the bailout.

"They have had financial problems for more than three years, but what brought them to the bottle neck, was the world economy slow down," Honarparvar said.

The large exposure to the domestic market has made the company vulnerable to falling demand among Iranians, as the country is facing declining oil revenues and sustained high levels of inflation.

No new proposals have been made since.

Iran Khodro Company was founded in 1962 under the name Iran National in the capital of Tehran and its first model was the Paykan which was released five years later.

The model was available in five versions according to the company: Standard, Deluxe, Kaarluxe, Javanan (for the youth), and Taxi.

Since the government subsidizes the price of gas, driving has been made a national pleasure and in 2007 the government attempted to impose limits on fuel consumption. Drivers were allowed to buy a maximum of 26 gallons per month but following complaints from drivers the amount was increased to 31 gallons.

Buying fuel above this limit means paying four times more.

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