Mahindra Two Wheelers, the two-wheeler arm of Mahindra & Mahindra (M&M), is set to become a co-owner of Peugeot’s scooter business. An announcement to this effect is likely to be made later this week. According to sources, the Indian company is set to acquire a majority stake in the business with an option of having full ownership later. It may be noted that M&M entered the two-wheeler industry with a similar step. It acquired an 80 percent stake in the Pune-based Kinetic Motor Company.

The latest deal could be seen as a strategic move by both Peugeot and M&M. The French automobile major is on a major financial restructuring drive which may have led it to divest stake in its scooter business. In addition, the deal could also facilitate Peugeot scooters’ entry into emerging markets through M&M.

For the Indian company, it will hope to get a big boost to its technological capabilities as well as a foothold in the European markets, not to mention the added sales numbers. However, the deal to acquire the reportedly loss-making Peugeot scooters would also mean an additional challenge to Mahindra Two Wheelers, which is fighting to turn profitable in an extremely competitive industry. Currently, M&M is a marginal player in the Indian two-wheeler market with a market share of only 1 percent. The company recently launched a new scooter called the Gusto, which is also aimed at export markets in South Asia, Central America and Africa.

Photograph: Peugeot Django scooter.