Peugeot maker PSA Group announces return to India

French carmaker PSA Group, parent company of Peugeot, Citroën and DS cars, today announced a return to India through a joint venture with the CK Birla Group. Both the companies signed agreements to produce and sell vehicles and components in India by 2020.

We reported back in September 2016, that Peugeot was re-assessing the Indian market and was looking for a right partner for its return. A few months after announcing its India comeback in 2011, Peugeot put the plans on hold due to a severe financial crunch.

The carmaker today affirmed a long-term partnership with the CK group and outlined an initial investment in capital expenditure of around Rs 700 crore for vehicle and powertrain manufacturing in Tamil Nadu.

The partnership entails two agreements between the PSA Group and the CK Birla Group. As part of the first agreement, the PSA Group will hold a majority stake in the joint-venture company being set up with HMFCL (Hindustan Motors Finance Corporation Ltd) for the assembly and distribution of PSA passenger cars in India, according to a PSA Group company statement. The CK Birla group acquired HMFCL in March 2014.

As per the second agreement, a 50:50 joint venture is being set up between the PSA Group and AVTEC Ltd for manufacture and supply of powertrains, the statement added. AVTEC is an arm of the CK Birla Group and manufactures powertrain and precision-engineered products.

In the beginning, the company aims to have an annual manufacturing capacity of 1,00,000 vehicles which will be expanded with further investment in the future. In fact, the carmaker will have a “significant” level of localisation, in a bid to achieve higher economies of scale and reduce costs.

Commenting on the alliance, Carlos Tavares, chairman of the managing board of PSA Group said, "Benefitting from the strong support of our Indian partner, the CK Birla Group, and a shared vision, this project is consistent with the strong execution of our 'Push to Pass' strategic plan and represents a major step in PSA Group's worldwide profitable growth in key automotive markets.”

The PSA Group had in April 2016 revealed its aggressive ‘Push to Pass’ growth plan for the 2016-2021 period. India is part of this plan as per which, the carmaker is targeting a partnership deal by 2018 and a product launch before the end of 2021.