The deal comes one week after international sanctions were lifted and restores contractual relations concerning the manufacture of Peugeot-branded vehicles currently produced in Iran. Earlier this week DS Automobiles announced that it's launching its first dealership in the country.

The new 50/50 joint venture, which builds on the two firms’ 30-year partnership, will also create a Tehran-based plant to produce Peugeot 208, 2008 and 301 models on a platform that will also be used by Iran Khodro to develop its own vehicles.

The agreement will be implemented around mid-2016, with the first vehicles scheduled to roll off the production line at the Tehran plant in the second half of 2017.

Carlos Tavares, chairman of PSA Peugeot Citroën's managing doard, said: “This strategic agreement turns the page on the period of international sanctions and enables PSA and Iran Khodro to start a new chapter in their 30-year history of co-operation. Our shared ambition is to offer our loyal customers high-tech products to deliver mobility that meets the highest comfort, safety and environmental standards.”