Peugeot may finalise Andhra Pradesh for car plant this month

After a long wait for an automobile unit to come up in the state, Lady Luck is likely to smile on Andhra Pradesh.

French car maker Peugeot Citroen SA is planning to set up a unit in the state with a capacity of one lakh cars and investment of about $900 million.

In fact, the car major, which had put its India entry on hold, is believed to have revived the plan considering the surge in the demand for cars in the country and looking at Andhra Pradesh due to the locational advantages the state offers.

“Tamil Nadu was always considered to be a suitable location for a car unit by any automobile company next to locations like Pune or Gurgaon. However, the situation has changed due to non-availability of land in Tamil Nadu and the port infrastructure that is becoming available in AP,” a source tracking the development said.

According to a Bloomberg report from Paris, Peugeot officials are likely to take a final decision on the issue this month and then put it before the company’s board for a formal approval. It is only after the board’s approval, the issue is likely to come up before the state government.

“The proposal has been around for two years. There is no fresh communication from the company’s side yet. We are not aware if Peugeot has internally taken a decision to revive the plan. If they are coming, we welcome them and offer all the support,” B Sam Bob, principal secretary, industries, government of AP, told DNA.

However, sources said that the company’s team had done an initial round of evaluation of the locations recently and has found Nellore on the coast as a suitable location owing to its proximity to Chennai - as was reported by DNA on January 12 this year.

“The ancillary cluster makes all the difference for any carmaker. Andhra Pradesh on its own does not have any ancillary ecosystem. By setting up a unit in Nellore, the company can take advantage of the existing ancillary network in Tamil Nadu,” the source explained.

In fact, it is almost a decade the car maker exited the country’s market. Peugeot had a joint venture arrangement with Premier Auto Ltd and manufactured cars under PAL-Peugeot. However, the company exited the arrangement after the losses continued to mount.

According to industry sources, it is also important for the company to have a presence in India now as much as it is for states like AP to get the unit. With the presence of every car maker including its rival Renault having a direct presence in India, Peugeot too is likely to expedite its India plans.

The company is also planning to make use of markets like India for derisking its business since it depends for most of the revenue on the European markets for now.