Peugeot keen on India even after losing 200 acres

Written by Jyotsna Bhatnagar | Ahmedabad | Updated: Jan 4 2013, 06:59am hrs
Despite the downturn in its international fortunes and the sale of some of the land allotted to it in Gujarat, French car maker PSA Peugeot Citroen is upbeat about its plans to set up a manufacturing base in the state.

Peugeot is still keen on setting up a facility in India specifically, at an upcoming automobile hub in Gujarat. The sale of 200 of the 584 acres land earlier allotted to it still leaves it with 384 acres, which is enough to build two plants. A company spokesperson told FE: Peugeot and Gujarat continue to work together. Land is still available to us. He also indicated that plans (for India) had just been rescheduled.

Gujarat recently sold off around 200 acres of land allotted to Peugeot at the time of the signing of its State Support Agreement in 2011 for setting up a R4,000-crore facility in Sanand with an initial capacity of 1.7 lakh cars. A senior government official told FE that Peugeot returned the land rights in September 2012 as it was unable to pay for the land thanks to its financial woes back home.

We have told Peugeot that they will be allotted land whenever they plan to commence their manufacturing facility in Gujarat, the official said, claiming the land surrendered was the state governments and it was free to to do with it what it deems fit.

Peugeot has thrown its weight behind one of chief minister Narendra Modis pet projects. It is one of the prime sponsors of the forthcoming Vibrant Gujarat Trade Summit 2013, a reinvented version of the biennial Vibrant Gujarat Global Investors Summit. Peugeot is among key organisers of Vibrant Gujarat this time and top executives are working hard to promote visibility in the summit.

In September 2011, PSA Peugeot Citreon announced plans to build a Rs 4,000-crore factory at Sanand by 2014. The facility was planned to have a capacity of 1.7 lakh cars, to be raised later to 3.4 lakh and employing 5,000 people. However, in mid-2012, economic uncertainties and its joint venture with GM for production and sourcing made it reschedule its India entry.

At that time, an official communiqu issued by Peugeot had stated, Peugeot is currently evaluating the scheduling of its project in India which may lead to some adjustments to the schedule as it currently stands. India is a key strategic market for the group... Taking into account the European market crisis which impacts significantly the Groups cash flows and profitability, PSA Peugeot Citroen announced its intention to reschedule its project in India, and construction operations on the production facility in Sanand during its financial results on February 15, 2012. It had, however, made it clear that the Indian market remains strategic for Peugeot Citroen, fitting well into the mid-term international development of the brand.

Peugeots Sanand plant also proposed to have an engine manufacturing facility with a production capacity of 100,000 units annually. The main aim of setting up the Indian facility was not only to focus on the Indian market but also export markets such as the ASEAN nations and Australia which also have a significant demand for right-hand drive cars.