PSA signals India intent with Citroen leading the charge

It was a little over a month ago when Carlos Tavares announced at a press meet in Paris that Citroen would be the face of Groupe PSA in India.

This week saw the Chairman of the Managing Board along with his leadership team in Chennai showcasing the Citroen C5 Aircross SUV, which will debut next year. Since the time he presented his Push to Pass five-year vision plan for PSA in 2016, Tavares has clearly meant business.

He has stuck to his India agenda while taking the French auto brand to a far stronger level globally with the acquisition of Opel Vauxhall from General Motors in 2017. Tavares is now planning to launch the Peugeot brand in North America and Opel in Russia. There are aggressive growth plans for the ASEAN region even while China is limping along.

There is no question that all this marks a remarkable showing for a group that seemed down and out just a few years ago. It was this fragility that prompted it to shelve its India plans of 2011, which involved setting up a new facility in Gujarat.

The global slowdown then prompted the company to explore an alliance with General Motors as a means of revival till stronger support came from Dongfeng Motors of China as well as the French government. Philippe Varin was then the boss while heir apparent Tavares had just came in from Renault where he was the COO.

Road to recovery

As soon as he got into the driver’s seat at PSA, the new chief got cracking and it has been a dramatic road to recovery from virtually being in the dumps. It has involved massive cost-cutting measures as well as a more pragmatic approach to business opportunities. Going global is part of the plan and this is where India will play a pivotal role in the growth story.

Tavares and his team have no illusions about the fact that PSA is setting foot into perhaps one of the most difficult markets in the world. There is one lead player (Maruti Suzuki) with a market share of over 50 per cent with its closest rival, Hyundai, a distant second with less than 20 per cent.

Other prominent brands like Toyota, Honda, Ford, Renault, Nissan, Fiat Chrysler Automobiles, Volkswagen, Skoda, etc, are fighting for the remaining share of the pie. GM has already exited and has confined its presence to producing cars for the export market.

To that extent, PSA is quite aware that it has its work cut out, which also explains why the leadership team is quite circumspect and taking one thing at a time. In addition, this year will see new entrants in the form of Kia Motors and SAIC of China (through its MG brand).

The arena will become more competitive, which also explains why there is already some consolidation happening between manufacturers. Leading the fray is the Toyota-Suzuki combine that will jointly develop products, swap models and work towards new challenges like electrification.

Likewise, Skoda will lead manage an India 2.0 programme where it will roll out competitively priced products along with VW. At one level, this is a do-or-die initiative for the VW Group that has been attempting to crack the India code with little success thus far. The joint drive with Skoda is intended to break this jinx and get the momentum going.

PSA will be aware of all these new dynamics panning out in the Indian landscape. Interestingly enough, the company has itself been in the news lately for a proposed alliance with Fiat Chrysler though it remains to be seen if any alliance eventually materialises.

Partnership speculations

Likewise, there have been murmurs about possible partnerships between PSA and Jaguar Land Rover, as well as one with General Motors, but all this remains purely speculative as of now. Clearly, after the remarkable turnaround story of Opel Vauxhall, the French auto brand has emerged a stronger name to reckon with in the global automobile market.

What does this imply for the India journey, which is now ready for takeoff with Citroen? Simply this — there is no telling what could potentially happen going forward in terms of forging new alliances. If PSA were to actually join hands with Fiat Chrysler worldwide, there could be some interesting permutations and combinations that will play out especially with a top notch brand like Jeep.

These are early days yet but the truth remains that the automobile industry is gearing up for a particularly disruptive era of mobility over the next decade. This reality has prompted companies to join hands and take on new challenges in areas like electric mobility, connected cars, autonomous driving, etc.

Further, there are growing geopolitical realities to deal with for the auto industry, which include trade wars, as witnessed between the US and China, or moves like Brexit that could severely hit investments in the UK. India’s auto ecosystem is also preparing for a new unknown in the form of Bharat Stage VI emission norms, which become mandatory from April 2020.

How the market reacts to more expensive cars (as a result of investments in technology) is the million-dollar question.

It is into this new era that PSA will step as it also gets set to woo a young buyer base that is now increasingly tilting towards smart, hi-tech driving. They will be more than willing to try out a new brand that promises a lot of excitement at an affordable price.

Importance of localisation

Tavares is laying top focus on localisation, which is absolutely critical if one has to survive in a landscape like India. This will also allow PSA to export powertrains and other components as part of the plan to boost its bottomline. By the end of the day, profitability will more than balance out the long wait in growing market share.

It is also a far more confident PSA that is now ready to take on the India challenge and one of the reasons is the successful integration of Opel Vauxhall. This is a far cry from the first time it entered the country in the early 1990s as Automobiles Peugeot in a tie-up with Premier Automobiles.

Nothing worked according to plan even if this was one of the earlier joint ventures soon after the gates were thrown open to multi-nationals. Peugeot exited in end-1997 following a series of business setbacks and the legacy it left behind was not too flattering. People were rendered jobless overnight while financiers, dealers, vendors and customers were gobsmacked by the sudden turn of events.

Peugeot then contemplated a comeback with Tata Motors to manufacture the 307 but the proposal was shelved because of viability issues. The next big step happened with the Gujarat plan in 2011 and, this time around, the intent was bang on except that the world went into a tailspin following the aftermath of the 2008 Lehman crisis.

Peugeot scrapped the Gujarat project and it truly seemed as if its India comeback plans were going to be permanently jinxed. It went through hell and back during the global slowdown and is now a far more formidable entity. A fresh start in India with Citroen leading the way also effectively wipes out the Peugeot legacy of the 1990s.

Common factor

Yet, there is one interesting aspect about this innings that has something in common with the first entry. At that point in time, Premier Auto was Peugeot’s ally while this time around, it is the CK Birla group, better known as the manufacturer of the Ambassador under the Hindustan Motors (HM) umbrella.

Both Premier and HM are among the oldest automobile brands in the country even if they have stopped production at their plants. The Ambassador bid adieu five years ago when the shutters came down on its West Bengal facility. Premier Padmini had exited many years earlier from its Kurla facility near Mumbai. Both brands are now a part of the taxi landscape in Kolkata and Mumbai.

In the meantime, Automobiles Peugeot has evolved to Groupe PSA but its choice of ally is interesting. The best part is that the French auto-maker has acquired the rights to use the Ambassador brand from the CK Birla group. Will this actually happen sometime in the near future?

Whilst on the subject during the 2017 Geneva Motor Show, Tavares had told this writer that ownership of the brand would perhaps translate into an opportunity in its India innings.

“We have to eventually see if it makes sense to the Indian customer. The Ambassador is an iconic brand and warms the hearts of people in India. If there is an opportunity where it brings value to the eyes of customers, we have the brand and can use it,” said the PSA chief.

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