Carlos Tavares: 'If one wants to sell profitably in India, one needs to source no less than 90-95% of the parts locally.'

On February 26, the PSA Group confirmed that the Citroen brand will be its launch vehicle for the Indian market and will be the one with which it will re-enter the Indian passenger vehicle market.  The India project was announced as part of the Push to Pass plan and launched at the beginning of 2017 with the signing of two joint venture agreements with the CK Birla Group.  The Group’s aim is to “be Indian in India”, to manufacture vehicles and powertrains in the state of Tamil Nadu and to bring state-of-the-art technology for an eco-friendly new product range starting with the C5 Aircross. 

At the Geneva Motor Show last month, Carlos Tavares, Chairman, Groupe PSA, spoke to Hormazd Sorabjee on the plans for brand Citroen In India and what customers can expect.

How will PSA's India entry be different this time?
Our approach can be summarised in one single word — scalability. We want to move step by step and consolidate each step that we are implementing. For instance, the first step for us was to find ourselves a good partner in India and we were successful by making an agreement with the CK Birla Group.

Now, within this agreement, we have a powertrain and a vehicle plant division as we understand that to play in India, we need to localise quite deeply and produce cars in the country for the domestic market.

Will the new vehicle plant's annual production capacity of 60,000 units be enough then?
We want to be scalable which means that when we reach that level, then, it would be time to think about the next level. We don't want to go in the red. In fact, we want to come into India and stay and not leave due to low profitability. That is why scalability is so important and we have our first manufacturing footprint in terms of vehicle and powertrain plant which already exists, and they are very frugal and cost-competitive as well.

From here, we will introduce our products under the Citroen brand as we've already announced. We will also make sure that our dealer network takes care of the Indian customer in a way that it makes them happy and also makes business sense for the dealers. If they have the right footprint with regard to the distribution and marketing model, we can also look at bringing more products and more technology and, eventually at one point in time, increase capacity.

So, in a nutshell, scalability is the key word because we want to confidently step in and want to avoid any risks of stepping out.

Why did PSA acquire the Ambassador brand and why did you choose Citroen for India and not Peugeot?
We recently announced three major initiatives — bringing the Peugeot brand to North America, bringing the Citroen brand to India and lastly, getting the Opel brand back to the Russian market.

We have to focus on each of these three major brands as a challenge to be overtaken. Why Citroen for India? India is a big, enormous market and also Citroen is a brand which is very close to people. It is a humanistic brand. I think that getting emotionally connected with people in India is very important because they want something that is modern, comfortable, safe, value-for-money and affordable, and Citroen fits all of those expectations.

Therefore, since it is the most closest to the expectations, it is the best brand to select for India from the PSA family. What is also important to me is the history of the brand, which dates back 88 years.

Regarding the Ambassador brand, it is part of our assets and we can use it whenever we think is appropriate. I am very willing and eager to listen to ideas from Indian enthusiasts about how to leverage that brand. I am very open to suggestions.

Is cost versus quality a big challenge for a new entrant in a value-conscious market like India?
I think first of all, it is obvious that if one wants to sell profitably in India, one needs to source no less than 90-95 percent of the parts locally. That is a given and holds no point of discussion. If you cannot do it, don't step into the Indian market. We started with that and it was a rebirth for the project.

Now from here, there are different kinds of quality, and of course everything that is related to basic quality, durability and breakdowns will be made sure that meets our global standards. The remaining portion of quality such as perceptible quality, fit and finish, materials et al, all of that is important as well. Believe me, we are not going to cut corners and will respect our Indian consumers.

We are going to bring the best of our worldwide quality standards and ensure that not only are we affordable but the Indian consumer will be able to enjoy the best of technology and quality standards with rigour that our engineers are able to deliver to this new market.

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