PSA Group to start new India innings with CMP-based model, 10-15K units annually

by Sumantra B Barooah & Ajit Dalvi 25 Jan 2017

Carlos Tavares, chairman, PSA Group, and CK Birla, chairman, CK Birla Group, announce the two joint ventures.
Carlos Tavares, chairman, PSA Group, and CK Birla, chairman, CK Birla Group, announce the two joint ventures.

The PSA Group seems to have zeroed in on the initial product/s scheduled to be launched in India in 2020, though it is yet to finalise the brand with which it will enter this market, which is "central to PSA's 'Push to Pass' strategic plan".

Following the announcement of the French carmaker’s planned entry into the Indian market in association with the CK Birla Group, Carlos Tavares, chairman, PSA Group, said the model would use the Common Modular Platform (CMP). The model/s will see significant amount of adaptations to meet local market needs.  

PSA’s Common Modular Platform is designed for B- and entry-level C-segment models. CMP, which is also known as EMP1 (Efficient Modular Platform), is set to become operational from 2018 and could be employed to develop close to as many as 20-odd models ranging from sedans to SUVs.

Tavares says the brand and its market positioning in India will be frozen within a year. Groupe PSA owns three brands – Peugeot, Citroen and the luxury brand DS.

Avtec helps swing the deal

Groupe PSA is understood to have done due diligence on some Indian automakers but what swung the deal in favour of the CK Birla Group is its wholly owned company Avtec and its powertrain business. This will help PSA achieve high localisation levels, which are critical if the made-in-India car has to have an affordable price-tag. "We can't be successful in India if we don't have localisation rate which is extremely high," remarked Tavares during a press meet.

In his speech today, Tavares said that the initial starting production capacity will be around 10,000 to 15,000 units. “Scalability of the business is the key word to keep the business health correct,” he said.

PSA though is yet to decide on its positioning in the market. "We have many different options. We are now evaluating the most potential direction that we should be taking. That's something related to the brand selection that we haven't decided yet."

The new JVs (one each for vehicles and powertrains) will see an investment of 100 million euros, or Rs 764 crore. Two-thirds of this amount will be invested by Groupe PSA and the rest by the CK Birla Group. This is a much smaller amount than the Rs 4,000 crore that the Group planned to invest for its 2011 India entry plan of setting up a plant with initial capacity of 165,000 units per annum, in Gujarat.

Make in India plan advanced a year ahead of schedule

In its latest move, which Tavares says is being executed a year ahead of the original plan, Groupe PSA seems to be drawing a long-term sustainable strategy cautiously. "What is important for us, is to step in, not to step out later on. That's why, for us scalability is so important. We want to start with a limited size, demonstrate our ability to do the right things and then move up step by step. We want to start with a high level of localisation. If not, we will be not be cost competitive and therefore it will not be possible to stay. With the CK Birla Group, we have found the same open mindset, the business entrepreneurial mindset.  We have found the opportunity to have the localisation of powertrain which is the most difficult thing to do in a given market. The CK Birla Group is the best," said Tavares.

On its part, the CK Birla Group will once again get into the hurly burly of the automotive business. “We have embraced make in India, for India and for the world, for several decades now. 1,500 jobs will be created directly by the JVs, and thousands of jobs indirectly across the country,” said chairman CK Birla.

HM-Mitsubishi relationship

It is to be noted that Hindustan Motors, now HMFCL or Hindustan Motors Finance Corporation Ltd, has a longstanding relationship with Japan's Mitsubishi Motors Corporation to assemble and sell its cars in India. That association, Birla says, will continue alongside the new relationship with the PSA Group. 

Also read: The models that Peugeot could bring to India


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