Peugeot in advanced talks to set up operations in Tamil Nadu

The formalisation will see an inflow of about Rs 3,000 crore into TN, multiple sources in the know of the development said. The car manufacturer will use an existing unit of Hindustan Motors (HM) in Tiruvallur, apart from setting up a part of its operations in Hosur, a source said, adding, “crucial discussions are on and the deal will mark a new chapter in the auto history of the state”. It is learnt that Tata Technologies has been engaged to work on the powertrains. Peugeot’s SUVs could be made in the HM plant or at Oragadam, which is on Peugeot’s radar for setting up its plant. In Jan ’17, PSA Group said a 50:50 JV was being set-up between it and AVTEC Ltd for manufacture and supply of powertrains.

Existing unit of Hindustan Motors to serve as one unit, plans afoot for second plant

The stage has been set for the signing of a mega project that will establish yet another French connection for the state, that has attracted the likes of Renault and Saint Gobain. 

With an eye on making its debut on Indian shores, Peugeot, the subsidiary of French auto major Groupe PSA, is said to be in ‘advanced stages’ of negotiations. Once formalised, it could bring in investment in the range of Rs 3,000 crore into TN. While an existing unit of Hindustan Motors (HM) in Tiruvallur is being considered for manufacturing SUVs, the company is also looking at Oragadam for making SUVs. 

In January 2017, the PSA Group in an official statement has confirmed that a 50:50 joint venture was being set-up between the Group and AVTEC Ltd, a part of the CK Birla group, for the manufacture and supply of powertrains.  The company had then said that the manufacturing sites for both vehicle assembly and powertrains will be based in TN.  Now, it is learnt that the company has signed up with Tata Technologies for the manufacturing of powertrains. 

The source added that “crucial discussions are on and the deal will mark a new chapter in the auto history of the state.”  Meanwhile, Peugeot maintained that a decision related to the location of a future plant in India had not been taken at this stage, as per media reports. Gregoire Olivier, member of the Managing Board and Executive SVP for Asia, had met with high-ranking authorities of Tamil Nadu and Gujarat last week to discuss the matter, Peugeot said in a statement. The localisation of the plant in Andhra Pradesh also remains an option, it added. It is learnt that Peugeot has begun recruitment, head hunting professionals for key profiles in the company. General Motors veteran Saurabh Vatsa, had come on board in January this year. He will steer the India Marketing Operations in his capacity as Sr Director at Groupe PSA. 

VG Ramakrishnan, MD, Avanteum Advisors LLP, a company with marquee auto clients shared that Peugeot would initially target the domestic market, and thereafter focus on South Asia and Africa regions. “If metros like Mumbai offer one kind of market, other small towns provide a testing ground wherein the auto player gets a range of experiences. This helps in the rollout of entry level to premium cars,” he explained. 

In his view, Peugeot, will focus on the middle market as the entry level segment may not be a viable option for it. Also, that segment will enable the company to launch stylish products, incorporating the French passion and contemporary design. “This approach will give it a good base as Peugeot will not shy away from bringing such products into the market,” Ramakrishnan says. 

He also says that the company had always believed in a cautious route and had gone into hibernation after serious challenges in the European market. The rationale of re-entering the subcontinent was that it had been conserving energy so that it could withstand market pressures. 

Chennai’s tryst with Peugeot began in 2007, when it had selected Oragadam, in Sriperumbudur, the hub of auto giants, to flag its presence. But owing to litigation issues, the project had to be shelved and alter its plan with the management deciding internally to put everything on hold.   But, it was in 2015, during a January road show that talks of reviving the project began with the industry officials pitching hard for its entry into the auto citadel. However, the business environment then was not conducive for Peugeot to make its India debut. 

After intense debates on whether to go for a greenfield or a brownfield project, the management opted to take over the existing facility of HM, which owned the iconic brand Ambassador. In February last year, the CK Birla firm HM entered into a pact with Peugeot SA for the sale of Ambassador, for a consideration of Rs 80 crore.