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Iran National Factories, also known as Iran Khodro, was founded in August of 1962. The company attempted to produce various Fiat products, with no success. After debuting a new concept on August 17, 1962, the company was licensed to build the Hillman Hunter and created the Paykan, which entered production in 1967. Hillman, part of the Rootes Group was purchased by Chrysler and later taken over by Peugeot. In 1985 Iran Khodro purchased the equipment necessary to produce the Paykan, but Peugeot continued to supply engines from its 504 model.
Production operated at a pace of 6,000 units a year from 1967. Production capacity is now running at 120,000 units per year with 98% of the parts supplied by Iranian companies.
The Paykan was due to be replaced in the late 1970s when the Islamic revolution occurred and the international investment necessary disappeared.
In an agreement with Peugeot, Iran Khodro began producing the Peugeot 206 in October 2001, at a rate of 120,000 units a year for ten years. A minimum of 65% of domestic (Iranian) content.
In 1996, it was decided to redesign the ancient Paykan 1600. Codenamed X7, the Samand was the culmination of this program. With the assistance of Peugeot, among others, Iran Khodro launched the Samand in late 2001. Production is slated to start at 5,000 units per year rising to "over 200,000 units within five years."