Joint production of Benz and Iran Khodro from June 2016

Reporting "Asre Khodro", In addition to the cooperation of Iranian automakers with Chinese partners who were the main parties of Iranian manufacturers, and the probabilities of Iranian and American automakers’ cooperation, European companies, especially German, French and Italian automakers will be the new partners in the post sanctions era. The countdowns to the finalization of the contract between Peugeot and Renault of France, Italy's Fiat, and Benz of Germany are already started; however, Mercedes-Benz of Germany is of special importance due to its brand quality and prices. Although luxury and high prices of passenger, commercial and freight cars of this German company act as an obstacle to its presence in the Iranian market, the presence of this company is beneficial due to the transfer of technology from the German automakers in the combined production of passenger and freight cars to Iran. Not long after Hashem Yekeh Zareh, Managing Director of Iran Khodro, promised to return Benz to Iran, senior managers of Mercedes-Benz came to Iran and started negotiations for joint cooperation of commercial vehicles. Following this, Iranian Setareh Co. being its representative was opened in Iran as the sales and after-sales service’s office of Mercedes-Benz passenger car which began to enter our market.
A specified time is not regarded for the negotiating parties to jointly develop Mercedes-Benz passenger cars in Iran and it’s been stated that this matter is subjected to further investigations and the necessary infrastructure needs to be provided in the future, but it seems that cooperation between Iranian and German partners are encouraged to jointly develop and supply heavy and light commercial vehicles of Mercedes-Benz sooner than the passenger cars in Iran. In an exclusive interview with Gholam Reza Razzazi, managing director of Iran Khodro Diesel, we asked about the latest negotiations and plans with Mercedes-Benz for joint production or assembly of the productions of this company in Iran. He stated that Iran Khodro Diesel was the region's largest manufacturer of commercial vehicles having considerable engineering ability and production capacity. The interview is stated in the following.
* With the implementation of Joint Comprehensive Plan of Action and return of the foreign automakers to Iran, a new round of cooperation between Iran Khodro Diesel and Mercedes-Benz of Germany is secured. How is this cooperation? Is a new contract signed?
Cooperation of Iran Khodro and Daimler can be considered from two aspects of commercial vehicles and passenger cars; this cooperation is stated in the framework of the operation of the sales of the Iranian Setareh Co. The new contracts of Iran Khodro Diesel and Daimler will be signed until the end of the year. Also we are attempting to establish joint venture corporations. Most of these contracts are allocated to the production of heavy trucks; the contracts of light vehicles are being considered. The production of Mercedes-Benz Actros trucks which have a more powerful engine are considered; these trucks will replace with Axor and in the near future will be removed from the circuit of production. The new 7m length minibuses with a more capacity, and urban 12m and 18m length buses have been designed and are now being tested.
* How is the cooperation of Iran Khodro Diesel and Daimler, will the assembly of German automaker's products be the main approach? How is domestication achieved in this contract – if it is regarded-?
Although the cooperation of Iran Khodro Diesel and Daimler for the production of commercial vehicle is started with assembly, according to the schedule, it is predicted that the joint production lead to the manufacturing of domestic products.
* How is the domestication of joint productions predicted in the framework of these contracts?
Based on the framework developed by the Ministry of Industry, Mine and Trade concerning the joint production of vehicles, the domestication is started by 15% and gradually reaches to 60%. We aim at reaching the 60% amount through a three year schedule.
* How much is the volume of investments for the joint production of vehicles and how are the conditions for the establishment of the joint venture company?
The deals are not still finalized and the investments are being calculated. The final deals will be determined during the next quarter. Also, it is suggested that two joint venture companies should establish; one of them being related to the sales and after-sales services of Mercedes-Benz in Iran which allocates 51% of the share to the Daimler and 49% to Iran Khodro. The other company in the field of joint production of the German partner will be established in Iran; in this company 51% of the share is allocated to Iran Khodro and 49% to Daimler.
* When is the implementation of joint production contract?
Joint venture contracts are being signed by the end of current Persian calendar year (March 2016) and will be operated and implemented from June.
* Previously, it has been stated that compensation should be paid to Iran Khodro by Daimler because of unilateral breach of contract and cessation of cooperation. How the compensation is paid?
The compensation for losses resulting from the unilateral cancellation of contracts by Daimler was paid to Iran Khodro Diesel two years ago in the form of spare parts.
* How is the production and supply of passenger cars predicted in the framework of new cooperation?
The supply of Mercedes-Benz passenger cars in Iran has already started with the opening of this company’s sales offices which is the Setareh Company. Some negotiations are started for the joint production of Mercedes-Benz passenger cars in Iran; they will be implemented if the product proliferation is plausible. 
* Is Mercedes-Benz vehicles’ assembly in the previous line resumed?
Yes, according to market needs and product proliferation, the assembly of Mercedes-Benz vehicles by Iran Khodro is resumed by restructuring the previous production line.
What is the plan of Iran Khodro Diesel in the production of Mercedes-Benz intercity buses and have you had any negotiations?
In the production and supply of intercity buses we have selected a few products; right now we are doing some market research so that we may sign a contract according to the needed proliferations. But for now we're concentrating more on the heavy trucks and cargo vehicles.
* How many Benz trucks are being produced and what are their features?
The new contracts are based on the production and supply of trucks with different price ranges and in general, we have invested on a total of 8 types of trucks. These vehicles will be offered with different capacities.
* How much would be the price range of trucks and trailers?
The prices of these products are not yet determined but right now a kind of Mercedes-Benz truck is produced in Iran, with a cost of 430 million Tomans (about 142.000 USD).
* Considering the high prices of Mercedes-Benz commercial and passenger vehicles in Iran, what kind of payment facilities have you considered for the purchase of these cars?
Even now the products are offered to customers in installments and with facilities. This practice will be continued in the new products but the details must be specified when sales contracts are signed. In the current sales method, customers can purchase the products of Iran Khodro Diesel with having 30% of the capital and the rest of the price will be repaid over a period of 2 to 4 years. In this context, different sales conditions are considered.
* So when are the first products of Iran Khodro Diesel launched on the market based on the new framework?
Hopefully, at the end next summer these products will be released.
* What kinds of products are released in Iran according to the contracts of Mercedes-Benz passenger cars?
In the field of passenger cars and according to different needs, some negotiations are made; in a way that we have negotiated with the taxi corporation to produce and supply Mercedes-Benz taxis and according to the needs, several types of Mercedes-Benz passenger cars will be imported and supplied. In the field of public use, different types in different price ranges will be available. In addition to Mercedes-Benz Co. now we cooperate more with Chinese automakers but negotiations with some other European and Asian companies are in progress so that we will be able to complete our product portfolio with vehicles which are not in the price range of Mercedes-Benz.
* Do your new talks with European companies lead to a paradigm shift in cooperation with Chinese automakers, considering the poor quality of Chinese tracks and dissatisfaction of some customers?
New products which are produced and supplied in cooperation with Chinese companies are favorable and have managed to attract customer satisfaction. The concept of quality is much better now compared to prior periods. Chinese products that are imported are the joint venture of Daimler in China and somehow are connected to the Daimler. In fact, this vehicle is the joint product of Daimler with China's Photons Corporation that Iran Khodro Diesel is producing it.
* This means that your approach is to move towards European manufacturers?
Iran Khodro Diesel’s policy is to maintain the European production market and our own brand; also we want to produce the products which have the same price as Chinese products to cover all the market. Right now our own brand is under our production which is something between Chinese and European products. However, Chinese products have their own customers because of the prices; since some customers prefer low prices to technical specifications of the vehicle. We must accept that our traditional trading partners cut off the relations because of the sanctions and didn’t give us spare parts but now things have changed and relations are improving. On the other hand, over the years, China has gained experience and has improved its products and it is expected to provide more customer satisfaction.