Philippe Varin is no novice to the Indian corporate terra firma. He successfully orchestrated Corus? merger with Tata Steel in March 2007 as a way for the business to participate in the consolidation of the steel industry. He was asked to stay with the business in order to complete the integration of the company into the new Group. Today, while driving Peugeot back to India after a ten-year break, Varin has a twinkle in his eyes when he talks of the time he saw Tata ?drive Nano from Singur to Sanand? during his stint with them. Despite a busy schedule during his whirlwind trip to Gandhinagar to ink a State Support Agreement with the Gujarat government, Varin took time out to have a free-wheeling interaction with FE. In a candid chat with FE?s Jyotsna Bhatnagar he speaks on a host of issues ranging from Peugeot?s return to the already overcrowded Indian automobile market to his company?s plans for India. Excerpts:
After a ten-year long hiatus, what has prompted Peugeot?s re-entry into India?
Today international development is a priority in the strategy of Peugeot. India is part of this strategy. Why? Because we think that the Indian car market is still at a nascent stage of development.
The car penetration rate is only 12 cars per 1,000 inhabitants as compared to 35 per 1,000 in China and 600 in Europe. We expect the most significant growth period to be still ahead of us. Hence, the future evolution of the Indian market creates ample room for a strong distinctive brand like Peugeot which will provide to the Indian customer a wider choice.
There were reports of a finalisation of an MoU with the Tamil Nadu government last month. What prompted the shift to Gujarat?
We had three options: Gujarat, Tamil Nadu and Andhra Pradesh. Each of the three States offered very favourable locations and it has been a close choice. In the end, Gujarat offered us a combined package of land infrastructure and support which matched our requirements.
What do you feel are the biggest advantages of locating your plant in Gujarat?
Sanand in Gujarat is developing into an automotive cluster which is recognized by the industry as having a high potential. From a geographical point of view, it is ideally located as it is central with respect to the principle automotive markets of Northern and Western India.
What markets would you be catering to from this plant and what models are you likely to be producing in India?
From this location, we will be progressively catering to the main automotive markets of the whole country. Regarding our models, our ambition is to gain a significant position in the C segment. We will achieve this strategic goal through the local production of vehicles not yet marketed elsewhere and specifically designed to meet Indian needs and tastes.
Prior to that, we will start establishing the Peugeot brand by introducing imported vehicles and through the launch in 2014 of the locally assembled Peugeot 508. This top down approach is also in line with the global upmarket move of the Peugeot brand. Peugeot will present further details of its strategy for the Indian market during the Delhi Auto Expo 2012, next January.
It is believed that you would be entering the auto space in India with a mid-sized car. What is the rationale for your decision at a time when most car manufacturers are in the process of bringing out products in the small car segment?
Within our approach, we see the C segment as a very promising one in the framework of the rapidly emerging middle class in India. The small car segment will be investigated in a second phase.
With competitors like Ford, GM, Tata Motors and now perhaps even Maruti setting up bases in Gujarat, don?t you feel there would be an over-crowding leading to pressure on available resources?
I assume your question is about human resources. India has a large pool of suitable talents. Nevertheless, we think that we can contribute to developing the skill sets of the Indian workforce by bringing to the country our own expertise.
This is the reason why we intend to launch an innovative public-private partnership with the government of Gujarat in order to create an Automotive Skills Development Institute. This Institute will train over 5,000 individuals in the first instance. Peugeot also intends to introduce its Peugeot Excellence System (PES) in India which will require a training programme on a continuous basis.
Last year the auto market grew by more than 30%. Do you think that kind of growth is sustainable for the coming years? What is your outlook on growth in the Indian car industry in the next 2-3 years? Will Peugeot match or exceed the industry growth rate?
Experts forecast the Indian market to be the largest right-hand drive market in the world by 2021 and the third one overall with 7.5 million units sold. By that year, we intend to be a significant player.
Peugeot is Europe?s second largest brand but has missed the bus in the auto market in India while other domestic and international players have consolidated their positions. What according to you will be the drivers for growth for Peugeot? How do you plan to establish yourself in this highly competitive and demanding market now?
As I said earlier, the Indian car market is still in a nascent stage of development. Many of our competitors are also relatively new or late entrants to the market and we expect the most significant growth period to be still ahead of us.
Thanks to its 200 years of industrial experience, Peugeot will bring to the Indian market its expertise and innovation. Peugeot is a reference brand, acclaimed worldwide for its elegant design and exceptional road handling. Peugeot is also well-known for its expertise in technology, in particular for the field of efficient diesel engines, a very important segment in the Indian market, which is highly sensitive to fuel efficiency and consumption.
In addition, by being the first car manufacturer to introduce a diesel Hybrid, Peugeot proves, as often in its long history, its unique innovating potential.