It was barely 10 days ago when Groupe PSA of France and Malaysia’s Naza Corporation Holdings said they were coming together for manufacturing operations.

This would see the Naza Automotive Manufacturing (NAM) plant in Gurun, Kedah, Malaysia, being used as the first manufacturing hub in ASEAN for PSA, the maker of the Peugeot and Citroen car brands. The French company will hold a majority stake in NAM while Naza will have cater to distribution of cars in in the domestic market.

Both will also explore distribution prospects in other ASEAN markets to address the potential 680 million customers in the region. Further opportunities will also be explored beyond ASEAN, with a potential to contribute significantly to Malaysia’s economy.

According to a press statement, this strategic partnership will benefit from a strong and qualitative supplier network. The NAM plant has been operational since 2004 and has a 50,000-vehicle production capacity.

The two companies had first joined hands in 2008 to develop a sustainable and profitable business in Malaysia and the ASEAN region. PSA’s investment in the NAM plant will see the implementation of its EMP2 modular platform dedicated to C and D segments.

With this move, PSA has reaffirmed its intent to go global and increase business aggressively beyond Europe. It has Dongfeng Motor to bank on for its China strategy, which again could see exports heading out to the ASEAN region.

India is the next big step and operations here will kick off by 2020 when the plant near Chennai will be up and running. PSA was among the earliest entrants into this market but did not stay on too long. It brought an abrupt closure to its operations at a plant near Mumbai in end-1997.

It was a good 15 years later when it announced its India re-entry with a facility in Gujarat but this was shelved thanks to the global slowdown and putting a freeze on investments. Now, with the Chennai facility in place, it will be interesting to see how the company goes ahead with its product plans.

By 2020, India will possibly be the world’s third largest car market but still the most competitive. Maruti and Hyundai account for two-thirds of the market and the balance has big brands such as Toyota, Honda, Renault, Tata Motors and Mahindra & Mahindra battling it out.

How PSA manages to carve a niche for itself in this arena will be interesting to watch. Beyond competitively priced products, it will also need to ready a robust dealer/after-sales network, which is not the easiest of tasks. The company bought out the Ambassador brand name from the CK Birla group and it remains to be seen if this will be leveraged for its India product range.

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