Peugeot to tie up with Caparo for India plan

Written by Rajat Guha | Rajat Guha | New Delhi | Updated: Nov 30 2009, 06:53am hrs
French auto major Peugeot-Citroen is expected to forge a joint venture with auto component manufacturer Caparo India, a wholly owned subsidiary of UK-based Caparo Group, for its India plan. Company officials familiar with the development told FE that the French company, which is re-entering India 11 years after its exit, is looking at setting up a capacity of 6,000 units initially with an investment of around Rs 1,500 crore.

What seems to have worked in Caparos favour is its huge land banks across India. This would save Peugeot from the arduous task of land acquisition. However, the exact amount of land bank that Caparo has in India couldnt be immediately ascertained.

Industry sources said Peugeot and Caparo have been in exclusive talks for some time and are meeting in the next fortnight to work out the modalities of the deal. When contacted, Caparo India MD Uttam Bose declined to comment.

Peugeot plans to roll out cars in India by 2012 which would be a mix of both mid-sized and hatchbacks. However, it is not clear at this stage whether the French major would introduce Peugeot brands first or the Citreon range. But it is understood that the company will introduce cars in both the Rs 5-6 lakh and Rs 8-10 lakh price segments. Peugeot is likely to be marketed as the mainstream brand while Citroen may be targeted at the top-end segment. This model is followed in other countries where the JV has a presence.

Peugeot-Citroen has been eyeing the Indian auto market for long. In fact, the companys senior management team had visited Andhra Pradesh in June to meet the officials of the state Industrial Infrastructure Corporation and the industries department with an intention of setting up a greenfield project in the state.

Its been 11 years since Peugeot exited India when its earlier joint venture with Premier Padmini fell through. The JV used to manufacture the 309 model in the country, which failed to clock any major numbers.

Of late, Peugeot-Citroen has been aggressively targeting emerging markets to ramp up sales as it is hard-pressed for margins in its home country. Peugeot-Citroen has popular brands like 407, 206, 308, C4, and C5 in its kitty.

Caparo India, an Indian business arm of UK-based Caparo Group, offers complete lifecycle solutions for automotive systems, assemblies, advanced composites, modules and components. It has for long shown interest in vehicle manufacturing.

In 2008, Caparo India had signed a technical agreement with Hyundai Motor Company to manufacture luxury buses for sale in the Indian market. However, the two pulled out of the agreement earlier this year due to the slowdown in the commercial vehicle market.