PSA draws up China blueprint

It was among the earliest entrants into India and, ironically enough, the first to call it quits in end-1997. PSA Peugeot Citroen then explored a comeback with Tata Motors sometime in 2001 and, more recently, finalised plans to set up a plant in Gujarat.

However, things went completely awry when the company began losing ground in Europe and had to set its house in order all over again. The Gujarat project was scrapped and PSA’s top priority was to stay afloat even while the ship was sinking fast.

General Motors picked up a seven per cent stake as part of a revival plan but finally it was left to Chinese automaker, Dongfeng Motor which came in as the knight in shining armour. It picked up 14 per cent along with the French Government which meant that PSA was finally out of the woods.

And even while talks continue about an India return, it is clear that the French automaker will give top priority to China. This is just not because of the Dongfeng bailout but also to the fact that this is the world’s largest automobile market in which PSA has been growing rapidly.

It is also the only way the company can grow its business beyond Europe especially when other growth regions like Brazil and Russia are not in the best of shape. Carlos Tavares, CEO of PSA, is doubtless aware of India’s potential but everything will have to wait till China’s needs are met.

It was some weeks ago that the company put in place a business plan for China where, apart from Dongfeng, it also has a valuable ally in Changan. From the top management’s point of view, it is important to ‘unleash PSA China’s strengths to tackle the world’ which pretty much reinforces the point that this country will be a strategic global hub for the Asia-Pacific region.

PSA will endeavour to transform a growth story into a performance driver for the group which will involve enhancing brand value in China through a global brand positioning. The country will be a pillar of the core model strategy which will also involve R&D synergies through partnerships. Significantly, Chinese vehicles will be developed on global programmes as part of the roadmap.

PSA, in its China field study presentation, has indicated that there are 2,700 people dedicated to R&D in Shanghai, Wuhan and Shenzen. The areas of research include vehicles, powertrain and connectivity. Reiterating that the Chinese R&D teams are ‘operational and highly qualified’, PSA refers to the Peugeot 408 sedan, Citroen C3XR, DS5 and DS6 which have been developed in China.

Eventually, the idea is to ensure a substantial global basket from China where 76 per cent of the local range will be common with Europe or other regions by 2022. The first global programme, C-CUV, will see five vehicles and four brands (Peugeot, Citroen, DS and Opel) assembled in China and Europe with Dongfeng, Changan and GM/Opel as allies.

Clearly, PSA is looking at a big global play for China where Dongfeng will be its key partner through the journey. It is likely that the two will look at the ASEAN region to ship out cars from China. If the script works according to plan, more than one assembly operation could possibly be conceived, possibly in Indonesia or Thailand.

All this also shows that Chinese automakers are keen to grow their presence in other markets. SAIC Motor Corp, for instance, had big plans for India along with GM but not much came out of this eventually. It will be interesting to see if Dongfeng will use PSA to, likewise, contemplate an India entry but the duo seem to confine this to ASEAN for the moment. It will perhaps be only after 2020 that a clearer picture for India will emerge.

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