PSA plans return to India by 2020

PSA Group will return to the Indian market by 2020, the French car maker said on Wednesday, unveiling a modest production deal with New Delhi-based CK Birla Group.

PSA, which halted its last Indian production in 1997, will invest €100m with Birla-owned Hindustan Motors to build cars in the state of Tamil Nadu. A second joint venture with AVTEC, another Birla company, would produce engines and transmissions for PSA and potentially for other manufacturers, the groups said in a statement.

The plans represented a “major step in PSA Group’s worldwide profitable growth”, CE Carlos Tavares said. The Paris-based manufacturer is pushing an international expansion to reduce its dependence on European sales.

India’s fast-growing market, which expanded 7% to 2.96million cars last year, has proved tough to crack for many foreign car makers.

PSA WILL PRODUCE 10,000 TO 15,000 VEHICLES A YEAR, CREATING 1,500 JOBS AT A HINDUSTAN MOTORS PLANT

An earlier attempt by the Peugeot brand ended with the collapse of its local joint venture in the late 1990s.

PSA said its return to India was deliberately more incremental than a €650m plant investment it had announced in 2011 with Gujarat state, then scrapped the following year amid financial difficulties.

PSA would begin producing 10,000-15,000 vehicles a year, Tavares said, creating 1,500 jobs at a Hindustan Motors plant in Chennai now assembling sport utility vehicles for Mitsubishi. The new offering may be supplemented with cars built from imported kits, while local output rises gradually to an expected 100,000 vehicles.

Suzuki’s low-cost Maruti brand now dominates in India with a 47% market share after progressively dethroning the Ambassador — built by Hindustan Motors between 1958 and 2014, initially based on the 1956 Morris Oxford.

French rival Renault has also made inroads lately with the frugal Duster SUV and its smaller Kwid sibling.

No decision has been taken on product strategy or even which PSA car brand to use, the companies said. PSA signed the production deals with the Indian group, which has annual sales of about $1.6bn, following negotiations with other potential partners.