Why India may be the next destination for Peugeot

Murali Gopalan Mumbai | Updated on February 19, 2014 Published on February 19, 2014

For the automaker, India is the only missing link in its BRIC strategy

The Dongfeng-PSA Peugeot Citroen alliance announced in Paris on Wednesday could pave the way for an India entry in the coming years.

The partners will establish an R&D centre in China as well as an export joint venture which will cater to the ASEAN region. Interestingly, in his brief presentation, PSA’s CEO-in-waiting, Carlos Tavares, has hinted at a renewed BRIC strategy. According to him, it is first imperative to turn around Russia and Latin America ‘with a deeper accelerated local integration and an appropriate product range’. It is as important to ‘reinforce an ambitious development plan in China’ leveraging the Dongfeng alliance.

History of tie-ups

The clincher is in the next step, which according to Tavares, lies in accelerating development in ‘next BRIC’ markets with a reinforced local integration.

This is where India may just become part of the French automaker’s roadmap as it sets about putting its house in order with its Chinese ally. PSA already has a presence in Russia and Brazil with India the only missing link on its BRIC radar. There is no indication if this will happen in a hurry but the importance of this market will not be lost on the carmaker and Dongfeng. This is pretty much on the lines of what China’s SAIC Motor Corp and General Motors had planned for India five years ago. This was the time the Chinese automaker threw a lifeline to GM which was in all sorts of trouble after the Detroit crash of 2009.

SAIC intended to create a presence in India before heading out to ASEAN. It is, of course, a different matter that nothing of the kind happened.

PSA shelved its India plans soon after it announced its second innings with a lot of fanfare. This was largely due to the fact that it was trapped in a severe financial crisis which just would not justify fresh investments elsewhere.

The top priority then was to revive its European operations which resulted in teaming up with GM.

Now, Dongfeng’s lifeline pretty much means that the road ahead for PSA will mean a renewed focus on emerging economies which contribute to over 40 per cent of its business.

The Chinese company would also be keen to build its brand overseas and this is where PSA’s global experience will help.

Tavares, who takes over from Philippe Varin during the course of this year, will need to steer PSA effectively on this new path.

He is no stranger to the imperatives of globalisation having spent years at Renault-Nissan. Tavares also knows what India has to offer and will be keen on working out a smart business model for PSA-Dongfeng.

Published on February 19, 2014
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