Peugeot Citroen’s entry into Indian markets

peugeot-citroen-logoFrench car maker, PSA Peugeot Citroen’s plans for an India re-entry is expected to be made soon. According to reports, Europe’s second largest car maker, PSA Peugeot Citroen, plans to invest Rs 3,000-3,500 crore to set up its green field operations in India.

Citroen has already evaluated sites in Tamil Nadu, Maharashtra and now is in discussion with the Andhra Pradesh Government to set up a manufacturing plant. The company has already had discussions with the Automotive Research Association of India (ARAI) to understand the regulations and homologation needs for its products.
According to industry sources, Andhra Pradesh will take precedence over the other two states since it is doling out huge tax breaks and other fiscal incentives to the French car maker and Citroen was offered a 1,000-acre site that had been offered to Tata Motors for the Nano project.

To enable PSA Peugeot Citroen to attain its strategic objectives, Philippe Varin has decided to make organisational changes in several areas, with the goal of strengthening management’s global scope and operating efficiency. The group has announced it is keen to explore developing markets like India, China, Thailand and Brazil with market specific small cars and sedans. It is working on two new models for developing markets, a small car and a cost-effective sedan, to be launched in the developing markets by 2013-14.

Peugeot’s first foray into India was through a joint venture with Premier Automobiles in 1994 to assemble models such as the 309 for the Indian market. The agreement was scrapped three years later after poor showing of its 309 and worker agitations at its factory in Maharashtra. Following Peugeot’s exit from India, there have been several conversations about its re- entry.

PSA’s move to re-enter the Indian automotive market sheds light on the declining automotive market in Europe, considering more than two thirds of the company’s revenues are generated in Europe. The Indian automotive market is one of the fastest growing markets and the rise in the disposable income among the rising middle class has led to a boom in the Indian automotive sector. With global auto brands like Volkswagen, General Motors and Nissan having already set up shop in India, Peugeot Citroen will have to come prepared to carve a niche for itself in the market.