Peugeot weighs comeback option for India

Ten years after it bid adieu, the carmaker is reversing course

MUMBAI: French carmaker Peugeot is exploring the option of setting up shop in India all over again.

According to top industry sources, Peugeot, which once missed the bus, is aware that it cannot afford an encore and teams have reportedly been asked to evaluate the strengths of various emerging nations, including India.

The company was among the earliest multinationals to enter the country in 1993-94 and the first to shut down in 1997.

The first indication of a comeback occurred when it joined hands with Tata Motors in 2000 to carry out a feasibility study for the 307, but that died a quiet death.

But the company’s dilemma is that while it is doing well in Europe, there is really no global strategy in place yet.

Part of the problem, observers say, lies in its ultra-conservative approach to new markets, for which the decision-making process in Paris takes time.

The fact that the PSA group (comprising Peugeot and Citroen) has started the process of sourcing key components from India is a pointer in the right direction, though making cars is, of course, an entirely different proposition.

The India of today is quite different from what it was when Peugeot decided to call it a day.

The biggest names in the global business are already here and others like Volkswagen and Nissan are in the queue.

What is even more significant is that two Indian companies - Tata Motors - and Mahindra & Mahindra - have held their own against these MNCs.

In such a scenario, the problems Peugeot could face include identifying the right partner, car model and location.

Potentially, strong Indian allies like Tatas and M&M can be ruled out (since they have already teamed up with Fiat and Renault, respectively).

Two-wheeler maker Bajaj Auto has already tied up with Renault and Nissan for its small car project.

Assuming then it that opts for the wholly owned subsidiary route, Peugeot will have to decide if it wants to get into the volume-driven small car business or a niche premium player. It does not produce inexpensive cars in the first place, which, by itself, complicates the problem.

And if the company makes top-end models in small numbers, the return on investment will be slow in coming.

In that case, it cannot afford to adopt the attitude of 1997 when the top brass in Paris decided that India was a non-starter.

Ironically, at that time, the carmaker was open to the idea of sharing its Kalyan facility with Fiat, but the latter was not interested.

It had also tried to rope in French counterpart, Renault, and the idea then was to produce the Kangoo multi-utility vehicle at the plant. None of these plans eventually materialised.

Renault is, of course, aggressively pursuing its plans here and is leveraging its global partnership with Nissan to tie up with many partners (M&M, Bajaj and Ashok Leyland) for cars and trucks.

Peugeot’s three-year stint in India was marked by labour trouble, leading to a plant lockout, shortage of CKD (completely knocked down) kits for the 309 and, finally, a showdown with its Indian partner that required the intervention of the court.

Despite getting a judgment in its favour, the company decided that enough was enough and closed down its plant in end-1997.

In the process, it left nearly 2,000 employees as well as vendors, dealers and borrowers in the lurch. Most of them still have bitter memories of their experiences but have moved on with life.

While this could still haunt Peugeot, the fact remains that it does not benefit from staying away from one of the world’s hottest car markets.