French automaker Peugeot mulling India re-entry

Twice bitten, yet not shy, French automaker PSA Peugeot Citroen plans to take yet another shot at the Indian car market, touted to become the third largest car market in the world after the United States and China by the end of 2020. FinancialExpress reports that the Peugeot-Citroen is considering two entry routes into India. A time frame for Peugeot’s re-entry into India has not been revealed though.

1. Contract manufactured Peugeot cars rolling out from General Motors’ Talegaon factory.

2. A tie up with Chinese automaker Dongfeng to establish a greenfield car making factory at Maharashtra or Tamil Nadu.

While General Motors India has expressed that it isn’t aware of Peugeot considering using its car factories in India for contract manufacturing, such a move will benefit General Motors, a company that is stuck with un-utilized manufacturing capacity on the back of slow sales. General Motors recently started exporting the Beat hatchback to South American markets, in a bid to improve capacity utilization. Therefore, rolling out Peugeot cars from its car factories could be good news for General Motors, which is also in an alliance with the French automaker in Europe.

On the other hand, Dongfeng, a Chinese automaker took a 14 % stake in PSA Peugeot-Citroen, infusing funds totaling 1.1 billion US dollars to turnaround the French automaker. Setting up a greenfield manufacturing facility in association with Dongfeng will spread out Peugeot’s risks and also give the former a toehold in the Indian car market, an attractive proposition for both automaker involved. Also, such a move would drive home Peugeot’s long term commitment to India, something that car buyers in India need to be convinced of.

In the past, Peugeot made a hasty exit from India in 2001, after its disastrous tie up with Premier Automobile Limited that resulted in the 309 sedan. The second exit came a decade later, in 2011, as Peugeot dumped plans of building a 4,000 crore rupee manufacturing facility at Sanand, Gujarat, and exited the country on the back of financial trouble at Europe, displacing many newly hired Indian employees in the process. In its second coming, the automaker intended to launch the 208 hatchback and the 508 sedan in India and the testing process of both cars had already begun. Will a third coming prove lucky for Peugeot? Time will tell.