Iran's leading car manufacturer Iran Khodro Company (IKCO) and France's PSA Peugeot Citroën have signed a deal to set up a joint company in Iran to produce Peugeot cars, a report said.

The joint investment for launching the company for a five-year run will amount to €400 million ($450.3 million), with the two sides bringing in 50 per cent each, added the Iran Daily News report.

The contract was signed by IKCO’s CEO Hashem Yekkeh Zare and PSA's Middle East and Africa (MEA) executive vice president Jean-Christophe Quémard.

The signing ceremony, which was held at Iran’s Ministry of Industry, Mine and Trade, and was attended by Industry Minister Mohammad Reza Nematzadeh.

Zare said production will begin by March next year, starting with the models - Peugeot 2008 and will then gradually move on to models 301 and 208. Of this, 30 per cent will be exported, he added.