September 15, 2011: Frederic Fabre, Head, Peugeot India

Peugeot has finally announced it is setting up a plant in Gujarat with the 508 as the first model. What happened to the midsize saloon which was under development at your Spanish plant?
We didn’t comment on our project plans because we believe the right time to do that will be the day of the Auto Expo 2012. So we have basically mentioned 508. Two cars were there when we signed the State-support agreement with the government of Gujarat. For the rest, I believe it’s fair to keep to what was said last fortnight. There will be more news at the Expo.
Is there a kind of a top-down strategy you are looking at? The earlier plan was to launch a CBU for the halo effect and then maybe go down?
Yes, we are doing a top-down approach. That’s the reason we are starting with the 508. You cannot say we will start with CBUs because CBUs in India are more niche. The strategy of the Peugeot brand will be to have at the same time some imported vehicles in CBU condition to show the technology prowess of the Group. CBUs will remain a permanent offering of Peugeot for the niche market. For production, we start with the 508 in 2014 and from there we will progressively go downstream to B and C-segment cars.
So you’ve got an M3 and M4 (codenames of new models) that are coming out of the Vigo (in Spain) plant?
That is not what I said. I just said that we will start with the C-segment and then go on with the B-segment car.
Could you have started with the RCZ, followed by the 508, M3 and M4?
You won’t have any dealer in India doing good business with only the RCZ. The second is that, as I mentioned, we plan on having C and B-segment cars and in the PSA qualification, the M3 is the Peugeot car manufactured at Vigo in Spain and we don’t want the car to be exported from Spain to India. The M4 is also manufactured there and is going to be a market leader in the emerging market close to Spain but under the Citroën brand. At present, we won’t talk about Citroën but focus only on Peugeot.
Is there any likelihood of the M3 being also produced in India?
That will be based on the investigations going on here. We are studying what the products are and what their potential adaptations would be to make them a success in India. We know from our competitors that tremendous success can be achieved when you market a car; tremendous failure can also come in the same way. Being a French car manufacturer, we already have a French competitor in Renault. It seems that some Renault cars are doing well and some are less successful, and we need to understand that.
Peugeot’s legacy in India has not been very good. It pulled out in 1997 due to issues with the JV partner. Do you think its history will go against the company or do you think people have short memories and it is going to be a fresh start?
From what I can see, the quality of the 309 and the efficiency of the diesel versions have been well accepted by the market and I still receive letters from happy customers who are more than happy that we are coming. So from the brand perspective, the 309 has been a success. Has our JV in India been a success in the past? If I look at the general story of JVs in India, I can see that Hero and Honda are separating, and Renault and Mahindra have separated. Bajaj had some study with Renault and decided to stop that project. So today we have decided to go it alone. We don’t rely on a potential partner, we rely on our resources and we already have Indian managers and vice-presidents. We are receiving more and more CVs from people interested in joining our company. So we rely on India and we rely on the cleverness of Indian people to make our Indian operations a success in India.Marc Bocque (international communications chief): Both the Group and the Peugeot brand have gained a lot between 1997-2011 and a huge experience in globalisation. Peugeot is not comparable at all to what it was 15 years ago and it has always been a very international brand. The brand and the Group have gained huge experience in China, Latin America, in eastern Europe and in many areas. So today when we come back to India, we are coming with an experience which will be extremely interesting for this market.
Will Peugeot enter the B-segment by bringing one of its existing models or will it develop an India-centric model that can also be exported to global markets? Will it be a Euro NCAP car or not, considering there are cost and weight issues?
The B-segment car that we plan to introduce does not exist today in Europe or anywhere in the world. The idea is to focus on the Indian market and there are some commonalities in some specification between India and some neighbouring countries. It can be Malaysia, Indonesia or some other ASEAN countries and yes, part of our production will be exported. From that perspective, the B-segment car that we plan is part of that export.Is the car going to be priced competitively? We had said design will be one of the core elements of the Peugeot brand in India, and that would be the key asset. The second is clean technology and third is value for money. We believe that we can achieve a localisation figure of 80-85 percent from the start of production. At Sanand, we have enough land to manufacture engines and gearboxes, so that’s part of the project. We also believe that the market would be looking more and more at fuel efficiency, so part of our project is to manufacture an engine which once again does not exist in our range and which will deliver around 25kpl in terms of fuel efficiency. Frankly speaking, PSA is also bringing in some values. PSA is still owned by a family and you know that the notion of family is quite strong in India. So we don’t make difference between the members of a family; we don’t have the one who has the right to have group safety and the ones to have no safety at all. The platform that we will introduce is capable of meeting Euro NCAP standards and, depending on the features and equipment that you purchase, there is a different level of Euro NCAP. So it would be the customer who will decide whether he/she wants something which is very sophisticated but more expensive.
But the customer won’t decide on the platform strength?
He/she will have the choice to put more or less equipment but the platform would be the same that we have in Europe. Generally speaking, it is a PSA platform. We won’t create a platform that is specific to India that would have low quality and low safety levels. That’s the reason why we want to start from the top and go downwards because we believe that we can, in that way, sell premium cars. If you get credibility for selling premium cars, then you get credibility for selling B-segment cars. There are a lot of manufacturers in India that are able to sell B-segment cars but are not able to sell premium cars.
So is this a new engine family or a derivative of an existing one?
This is a totally new engine family.
Would it be in the 1-1.5-litre range?
At the beginning, the right engine could be a 1.2-litre, three-cylinder for fuel efficiency. Or we can go with a 1-litre engine if need be. The range will comprise both petrol and diesel engines and Peugeot today is considered to be a leader in terms of diesel technologies. We also have the biggest diesel engine manufacturing plant in the world.
Would Peugeot look at a low-cost car like the Nano?
Do we have plans of manufacturing a competitor to the Nano? We are happy to be next to Tata Motors in Sanand but we have our own products and brands which are very strong. We don’t want to create a bad copy of the Nano.
What if Tata allows you to contract-manufacture the Nano with your badge?
We have a plan in India and are investigating conditions. I won’t speculate now.
Why did you select Sanand — was it fiscal incentives, geographic location or proximity to the port? What were the top three reasons?
None. When you are in Chennai, which is one of the options we discussed, you are about 40-60km from the port; when you are in Sanand, you are 400km from the port, and there is no advantage. When you talk about the incentives, we are investing in a plant for the long term; you don’t invest if you have an incentive on day one but we are losing money every day. So we prefer to have pain one day and have good returns every other day. What matters is running costs. We are not focusing on incentives but on suppliers who are ready to give quality and price competitiveness. The first reason why we came to Gujarat is the availability of land by the government which is matching our requirements. So the land is available and as our CEO (Philippe Varin) has a lot of experience in India as former CEO of Tata Steel Europe (at a time when Tata Motors was struggling with issues in West Bengal), you understand availability of land for him is very important. We started with 20 options in India, some States, investors or developers were proposing land to be acquired. In Gujarat we have land which is acquired; so we win on time and profitability of the project. The second reason is that Gujarat lies in the middle of India's top two car markets – Delhi and Mumbai; so it’s a good location logistically. Thirdly, with Tata Motors and Ford India already in Sanand, Peugeot's coming there has helped it turn into an automotive cluster by being the third player in the area. Then you have suppliers with the potential to cater to about a million cars. If we want to be competitive, we need Indian suppliers at a competitive price. Because we are in Sanand, we get Indian suppliers and there is a volume to win competitiveness.