Peugeot revises India launch target

Just weeks after announcing investment of euro 650 million (Rs 4,000 crore) in India for a greenfield facility, announced earlier this year, Peugeot has decided to scrap the plan, owing to unfavourable financial conditions.

Despite this, the company had said it would go ahead with the launch of one of its premium models in India, through the completely built unit, or import, route.

It had said the launch of its imported models would be according to schedule, with the models hitting the Indian market by 2013-end. However, now, the company is revising the timeline yet again.

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"Taking into account the European market crisis, which hit the group's cash flow and profitability significantly, PSA Peugeot Citroen announced its intention to reschedule its project in India and its construction operations at the Sanand production facility, during the announcement of the company's financial results on February 15," stated an email from a company spokesperson.

"However, the Indian market remains strategic for PSA Peugeot Citroen, fitting well into the mid-term international development of the brand. The timing of the introduction of Peugeot is currently being revised in line with the rescheduling of the project," the email added.

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Peugeot recorded a loss of euro 439 million (Rs 3,000 crore) in the last financial year. For this year, it has predicted a five per cent fall in sales in Europe, led by a 10 per cent decline in France.

In its latest annual report, while predicting seven per cent growth in China, the company did not specify any strategy for India.

The company was, however, in talks with potential investors for setting up dozens of dealerships across the country. It had also planned to target 100 cities in India for expansion. However, it has now put these plans on hold indefinitely.

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Peugeot had planned to tap General Motors (GM)'s plants in India to produce its own range, thus saving on investment.

However, these plans didn't materialise. GM, which has two vehicle manufacturing facilities and one engine- and transmission-making unit in India, showed little interest in the venture. Sources say the alliance would be largely restricted to the European market.

In an interview to Business Standard, Tim Lee, president (international operations), General Motors, said, "The GM-PSA Peugeot Citroen alliance is an important partnership for GM. This would have a positive effect on our company worldwide, particularly in Europe. We expect it to have long-term benefits globally. However, it's too soon to say how it would impact India and the Asia-Pacific region."

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Initially, Peugeot had planned to build an automotive and engine/gearbox plant across 600 acres in Sanand, Gujarat.

This area also took account space for its parts suppliers. In addition to 5,000 jobs for the automobile hub, Peugeot and the Gujarat state planned to create an automotive skills development institute within the Sanand automotive cluster.