PSA Group of France – makers of the famous Peugeot, Citroen and DS brand of cars, has just announced its plans to re-enter India with a Rs 700 crore investment.
PSA has tied up with the CK Birla Group, owners of Hindustan Motors Limited and the Ambassador car brand, for manufacturing cars and power-trains in Tamil Nadu by 2020. PSA has signed two agreements in Paris on Wednesday. The first agreement is a joint venture between Hindustan Motors Finance Corp Limited (HMFCL) and PSA Group, with the latter holding majority, to assemble and distribute PSA range of vehicles in India.
This venture will utilise CK Birla’s existing manufacturing facility at Tiruvallur in Tamil Nadu, from where the group assembled Isuzu commercial vehicles and Mitsubishi cars.
The Isuzu contract concluded in 2016 and Hindustan Motors has been looking for an opportunity to revive its manufacturing cars and auto components supply line. The contract with Peugeot comes at the right time when the Indian market is all set to emerge as one of the largest car markets in the world by 2025, with several niche segments and sub-segments throwing up exciting opportunities for many auto manufacturers.
PSA has signed its second agreement with another CK Birla group company – AVTEC, to manufacture power-trains and related components, in an entirely new facility that is likely to come up in Hosur, Tamil Nadu. The power-trains will meet PSA Group’s local requirement in India and also serve the growing international OEM market.
The decision to focus on power-trains is in line with the objectives of both the groups. The aim is to remain profitable in its quest to gain local market share and also emerge as a major OEM supplier to international auto majors.
PSA extends its “Push to Pass” global strategy to India
Speaking to the press in Paris, Chairman of the PSA Group, Carlos Tavares, said the two agreements with the CK Birla Group are part of its global “Push to Pass” strategy with “Mobility” as its central theme. The initiative is expected to strengthen the group’s plans for growth in key markets worldwide.
Mr CK Birla, on his part, stressed on the fact that the two ventures are part of ‘Make in India for the world’ strategy and how his group’s experience in frugal manufacturing will have good synergy with PSA’s state-of-the-art technology.
PSA is aware that the Indian market today currently stands at 3 million cars and is on path to grow anywhere between 8 to 10 million vehicles by 2025.
Innovation at the core of PSA’s future growth plans
PSA Group has been making investments in innovative technologies and services to build market share for its three brands – Peugeot, Citroen and DS.
The group has been developing autonomous driving technology and has been testing the same on its Citroen range of cars. Autonomous drive testing has already covered 60,000 km of Europe’s roads. The group is simultaneously working on developing a new electric power-train to run cars of the future.
Other innovative features being developed is Peugeot’s i-Cockpit design, which along with Citroen’s Connected Cam technology, is set to offer finer and safer driving experience. Innovation drives PSA and this is reflected in the group being ranked No. 1 in patent filing in France for the ninth consecutive year.
With India now set to be part of the PSA network, all these innovations will be introduced in India over a period which will help improve domestic manufacturing practices and drive profitability.
PSA entered India in the 90s
After having failed in its earlier two attempts at cracking the Indian auto market, PSA believes that their timing, choice of partner and the Indian market maturity, is just right this time for the auto major to enter this crucial and fast growing market.
In its first launch in India in the mid-90s, Peugeot entered the Indian market with its 309 sedan. Peugeot had entered into a joint venture with Premier Automobiles Limited (PAL) of Mumbai with a 32% stake.
The Peugeot 309 received a poor response from the Indian market and the relationship between the two companies soon floundered. Sales in 1996 were around 1,900 cars and in the following year it rose marginally to 2,000. By 1997, labour unrest at the plant along with losses touching $25 million further strained the relationship between Peugeot and PAL.
PAL was keen to withdraw from the relationship and signed up a JV with Fiat. Peugeot took PAL to Bombay High Court for violation of the non-compete clause, only to withdraw it later. The company soon shut shop and exited India.
Peugeot was facing bad times during that period, as it had recently withdrawn from China as well, where it failed to capture market share despite the overall market growing rapidly.
PSA is confident of 2017 and beyond
PSA Group has come a long way since the ’90s. Its technology has been proven with its cars performing consistently at the gruelling Dakar Rally (earlier known as Paris-Dakar Rally) every year.
During the ’90s, India was a one-car-per-family market. Today, it is fast moving to a 3-4 car-per-family market. The Indian car buying preferences have now matured, with buyers being more aware and selective of what they want. The fact that Renault in India, after a slow start is now seeing good traction has provided PSA with the necessary confidence for its India foray.
This augurs well for both PSA and CK Birla groups. PSA has a wide variety of car and SUV options to gain customer attention and emerge as a serious player in the Indian auto space.
PSA is in for the long haul this time around. The group has an existing car manufacturing capacity of 100,000 cars per annum and is investing Rs 700 core into the two new joint ventures.
Keep an eye out more exciting news from the two new ventures.