In a sign of the growing importance of the domestic auto market for global car makers, PSA Peugeot Citroen is planning to set up its first manufacturing unit in India soon. According to industry sources, the French car maker is weighing options of putting up a facility in Andhra Pradesh with an investment of more than $850 million.
Senior company officials are slated to meet later this month to finalise the broad specifications of the plant. Following that, they will approach the company board for ratification. The company is likely to commence talks with the state government after getting approval from the board of directors. A company spokesman in Paris said that Peugeot is studying opportunities in India but there is no decision and no timetable for a decision.
Since last year, speculations have been rife of the re-entry of Peugeot Citroen in India after exiting in late 1990s. Though the company is yet to give its official response on the matter, analysts said that it was the need to keep up volumes in a rapidly contracting market in Europe that forces the car maker to consider re-entering India. Close to two-thirds of the company’s revenues are generated in Europe.
A Delhi-based auto analyst with a consultancy firm said that the company would find it very hard to compete in a market characterised by cut-throat competition. ?Global auto brands like Volkswagen, General Motors and Nissan have already set shops in the country. Peugeot Citroen will first have to find a niche for itself in the market. It is not going to be easy,? he said requesting anonymity since he cannot speak on individual companies.
In the last twelve months, India, the second fastest-growing car market, has witnessed numerous launches from global car majors like GM, Ford and Volkswagen. In the next one-year, Honda and Toyota are also expected to launch their small cars.
Currently over 75% of the domestic car market is dominated by small cars. In this segment, Maruti Suzuki has a market share of more than 50%. ?Peugeot Citroen will be up against competitors like Maruti and Hyundai…the company would have to re-brand itself,? the analyst said.