Slowdown in Europe sees Peugeot reschedule India plan

French carmaker PSA Peugeot Citroën has shifted to more frugal spending mode as a result of weak economic conditions in Europe. It has reported a drop in net income from 1.13 billion euros in 2010 to 588 million euros in 2011, even as group revenues grew seven percent to 59,912 million euros last year. As a result, the company has decided to go slow on some projects. One of them is the India project which has been ‘rescheduled’. In his presentation of annual results on February 15, Philipe Varin, chairman of the managing board of PSA Peugeot Citroën, said the India project has been rescheduled as part of the company’s action plan to reduce capital expenditure and R&D spend in 2012. The company did not specify the rescheduled date, but it is likely to be delayed by a few months, according to an industry source. The action plan also includes stopping select capacities and less profitable projects.

The growth in the PSA Peugeot’s group revenue was driven by ‘success of new models’ and the expansion of its group company, Faurecia. “Deterioration in our business environment from the end of the first half led to very disappointing results from our automotive division. Other divisions – Faurecia, Gefco and Banque PSA Finance – made a positive contribution to our results,” says Varin.

The company says that the ‘disappointing’ performance in its automotive business is due to multiple factors which include ‘unfavourable geographic market mix’. Given the current and short-term weak projections for European markets, Peugeot may not delay its India plan too much as it sees this country as a ‘strategic market’.

PSA Peugeot Citroën announced plans to roll out its first made-in-India car in 2014 from the Sanand plant with the 508 saloon being the first product. The plant has a planned capacity of 170,000 cars. “We will continue to expand globally, especially with our second joint venture in China," says Varin even as his company expects “market conditions to remain difficult in Europe in 2012”. The company expects the Europe 30 market (geographical Europe) to contract by around 5 percent, while outside Europe, it expects growth in markets like China (up 7 percent), Latin America (6 percent) and Russia (5 percent). Varin said the company’s sales outside Europe grew 42 percent during the first half of 2011, followed by 46 percent during the second half, on track to touch 50 percent by 2015. As part of its strategy to capture opportunities in Asian markets, Peugeot has re-entered Hong Kong last month, after a three-year gap, with three models – 3008, 5008 and the RCZ. The French car major has also signed a deal with Philippine group Columbian to launch the Peugeot brand in Philippines this July. The Philippine market is pegged at 180,000 vehicles, and is projected to reach 500,000 vehicles in 2020.

Sumantra Barooah