Will Peugeot’s Re-entry Into India be Successful?

Peugeot sets up factory in Gujarat

PSA Peugeot Citroen is a French automobile company. It has 17 plants world over. Now it has entered into India for the second time. In its maiden attempt, it was a failure. At that time it partnered with Premier Automobiles. Now it is setting up a factory in Gujarat at an investment cost of Rs.5000 crore in Sanand alone.

Ignoring the popular small car segment?

PSA Peugeot Citroen will concentrate on B, C, and D class cars. It will introduce its Peugeot 508 car in India in 2014. When small cars are loved by Indians, PSA Peugeot Citroen is not entering into this most popular segment. It may be a mistake on the part of the company and again may result in failure.

Too large capacity

Again, PSA Peugeot Citroen’s initial capacity of 170000 cars per annum is on the higher side. If it is a small car segment, then it is okay. But that is not the case here. If PSA Peugeot Citroen exports the surplus, then it will be a good strategy. In about a decade, India’s car market may be worth 7.5 million. But right now, it may not be able to absorb the entire production of PSA Peugeot Citroen.

Huge potential in India

60% of Europeans have cars, 3.5% of Chinese have cars, but only 1.2% of Indians have cars. This shows the huge potential that exists for automobile companies in India. Purchasing power of the people in India is increasing and car market is expanding. PSA Peugeot Citroen is closing down its French plant in Aulnay that will involve a job loss of 3600 people.

Joining his friend

PSA Peugeot Citroen’s hybrid car combining electricity and diesel offers a mileage of 30 km per litre. PSA Peugeot Citroen has tied up with BMW for supply of petrol engines and with Ford for the supply of diesel engines. PSA Peugeot Citroen’s CEO Philippe Varin has worked with Tata Motors for a short stint and knows Ratan Tata personally well. Tata Motors has moved over to Gujarat when it encountered difficulties in Singur in West Bengal. Now, Philippe Varin has joined his friend in Sanand.

One third market share in electric cars

PSA Peugeot Citroen’s attempts to introduce electric cars in Europe have failed. The cars need to be charged once in around 150 km. Charging facilities are not good anywhere in the world. In India, the infrastructure is still poorer. Nevertheless, PSA Peugeot Citroen has one third of the market share in Europe in electric car segment, which is an achievement of sorts.

Singur scares away investors

Andhra Pradesh and Tamil Nadu offered lot of facilities to PSA Peugeot Citroen to make it to set up its plant in their States. But there was no land bank with the governments of Andhra Pradesh and Tamil Nadu. Any attempt to acquire land and then hand it over to PSA Peugeot Citroen involved stiff resistance, protests, demonstrations and lawsuits. Having already experienced these things in Singur when he was working for Tata Motors, PSA Peugeot Citroen’s CEO Philippe Viran decided not to take risk and opted for Gujarat.

No problems in Gujarat

Now that PSA Peugeot Citroen has moved over to Gujarat, it is happy there as it has no problems in this State. It has a fully integrated plant set up with the 584 acre plot allotted to it by the Gujarat government. It is also manufacturing engines and gear boxes in this plant. Phase II expansion will take its capacity still higher. It also wants to export one fourth of its production. PSA Peugeot Citroen has given employment to over 30000 people in Gujarat.