Renault selected Iran as a third production site for the X90, its "E5,000 car" for developing countries.
The timing of the announcement -- on the eve of the second Iraqi war -- is unlikely to win Renault friends in the US government.
The no-frills, family sedan will play a major role for Renault in new markets. China and Colombia are next on the list for X90 production, sources told Automotive News Europe.
A Renault spokesman declined to confirm China and Colombia, saying only "the number of production sites for the X90 will probably grow."
The X90 will be unveiled in mid-2004. It will be built in Romania by Renault-owned Dacia starting in late 2004 and at Renault's Avtoframos plant in Moscow, Russia, in early 2005.
If all goes according to plan, the Iranian X90 will follow shortly. A letter of intent signed March 16 calls for a Renault and Iranian government joint venture to build and sell the X90 locally. The letter was signed in Iran by Renault Chairman Louis Schweitzer and Reza Veyseh, head of Idro, Iran's Industrial Development and Renovation Organization.
Renault would be the seventh western carmaker to operate in Iran in partnership with local companies.
The timing of the announcement surprised many, coming a few days before the outbreak of war. With Iraq and North Korea, Iran is one of three countries US President George W. Bush calls the "axis of evil."
Renault's move comes amid much bitterness in the USA about France's opposition to war against Iraq.
"It's ludicrous for Renault to have put the spotlight on this operation in current circumstances," said a French auto executive who spoke on condition of anonymity. "There's no need to fan anti-French feelings among Americans, even if no French carmaker sells cars in the USA."
The Renault spokesman said the Iran deal comes as part of a long-term strategy to build and sell the X90 internationally. No company can afford business plans that are dependent on international events, he added.
Among the three assemblers controlled by Idro, Pars Khodro builds Nissan's Maxima, Patrol and a pickup. Iran Khodro assembles Peugeot 405 and 206 cars while Saipa makes Kia's Pride and Citroen's Xantia. Two independent assemblers, Kerman Motor and Bahman Motor, build cars with Daewoo and Mazda, respectively.
Iran's new-car market totaled 450,000 units in fiscal year 2002-2003.
Whatever Washington's reservations, many US companies do business with Iran. For instance, there are Visteon parts on the Peugeot cars that are sold in complete-knockdown (CKD) form to Iran Khodro. Visteon sells those parts to a France-based intermediary.