Peugeot puts brakes on India plans
Peugeot's second innings is still to start and it has already run into trouble. To give you a quick recap, Peugeot were expected to show their public face in India at the Auto Expo. At their show stand, they announced that they would begin with the 508, a 3-Series sized sedan as their launch car. This car would be a CBU import featuring only a diesel option - the 2.2-litre HDI common-rail diesel, and then first Indian-made car would arrive in 2014. The company would, to that end, set up a new plant in Sanand, joining Tata Motors, Ford and a host of other brands heading to Gujarant. Later in the year came the announcement that the company would invest Rs 4,000 crore in the plant, which would have an installed capacit y of 1.75 lakh cars per year. At the Auto Expo, the 508 was then expected to be joined be brand establishing cars like the RCZ, also to be a CBU. In the long run, Peugeot would be present in the hatchback segment and intial dealer plans listed a plan to cover 15 cities.
In May, when the 301 saw the light of day, speculation started that the car would come to India. The car was not officially listed as headed here, but the release information noted that the car was a family car designed for a wide variety of conditions including hot and cold climates as well as bad road quality. The car was to have engines spanning 71 and 115PS across three engines, a 1.2-litre and 1.6-litre petrols and a 1.6-litre diesel. Manual and automatic transmissions were available, the latter probably wouldn't arrive in India till later. The car was 4.44m long and was to be built in Europe at the company's Vigo plant - Turkey would be its first market.
But now it all seems to be totalling up to nought. In March, Peugeot and General Motors signed a joint development and procurement alliance that saw investment from GM in the French company. Part of the goal was to look to the future and part of it was to jointly attack overcapacity. Jointly developed cars are to hit markets by 2016. But they were expected to become each others prime partners in many markets.
The fall out for India was that Peugeot began to rethink their Indian investment. News reports said the company was now reconsidering the Indian plan from scratch. They were exploring the idea of leveraging the two General Motors India plants for local manufacturing instead of building their own plant. But even as the news took hold, GMI clarified that this was not going to happen.
But now more concrete news has arrived. A few weeks ago, Peugeot announced after many guidances to the effect that it was posting massive losses - Rs 3,000 crore approximately - in Europe as sales dwindled. Earlier, they had already had to close a plant in France as sales fell and high labour costs pushed the company deeper into the red.
The company then announced that it was rescheduling India plans, especially the construction of the plant at Sanand. It maintains that India is critical to its growth and sustenance in the future but investments would have to be pushed forward.
But the latest is that the company has put its India plans on hold indefinitely. The first CBU-route product announcements were expected by December 2012 followed by dealer openings and the bookings, but now the whole India strategy is facing an indefinite pause. As you know, Peugeot's first innings in India, in partnership with Premier Automobiles, got off to a good start with the 309 but even before the momentum had been built, the JV was in trouble and led to the company exiting India.
We expect that the French company cannot ignore a growing, vibrant market like India but simply does not have the money at this time to proceed with an expansion strategy in a big market like ours, no matter how lucrative. The company will be working hard to figure out a path back into the black and if it can settle the European crisis expect the plans to restart where they left off.
