PSA of France is set to script its India comeback with the CK Birla group, the makers of the iconic Ambassador.

The duo will commission a car project in Tamil Nadu by 2020 at an initial outlay of ₹700 crore and make one lakh units annually, according to a statement available on the PSA Group’s website.

The partnership comprises two joint venture agreements. In the first, PSA will hold a majority stake in the company being set up with Hindustan Motor Finance Corporation (HMFC) for assembly and distribution of PSA passenger cars in India. HMFC has in its fold a ready-made facility in Tiruvallur near Chennai that has, over the years, assembled Mitsubishi cars and Isuzu commercial vehicles.

The second agreement will involve setting up a 50:50 joint venture between PSA and AVTEC, originally a part of Hindustan Motors, for manufacture and supply of powertrains. AVTEC has a facility in Hosur and this arrangement will ensure high levels of localisation to keep costs in check. Access to a ready-made plant in Tiruvallur also puts in perspective a modest (initial) outlay of ₹700 crore when a car project of this size would have otherwise involved investments of at least five times more.

In fact, PSA had earmarked over ₹4,000 crore for its Sanand facility in Gujarat five years ago but had shelved the proposal following the global slowdown. Better known for its Peugeot and Citroen brands, it was among the early entrants to India’s automobile sector in the 1990s. The company had then teamed up with Premier Automobiles to manufacture the 309 model from a plant near Mumbai. However, it had to cope with a host of issues ranging from a lockout to shortage of kits that led to huge losses and closure of operations in 1997.

PSA then contemplated a comeback with Tata Motors to manufacture the 307 model but this plan was shelved too. A good decade later, the French carmaker announced its mega ₹4,000-crore investment for a new facility in Gujarat but that was eventually scrapped. Now, after putting its house in order, the company is ready all over again to participate in an intensely competitive market with a more pragmatic approach.

Previous alliances As for the CK Birla group, its flagship company, Hindustan Motors, has had alliances with General Motors and Mitsubishi over the years which were little to write home about.

It was also in the news a couple of years ago when it shut down its Uttarpara plant in West Bengal and brought the curtains down on production of the Ambassador.