French car maker PSA Group re-enters India, sets up JV with CK Birla Group

After two failed attempts to scale up business in India, French automotive manufacturer PSA Group, known for Peugeot and Citroen brands, is once again eyeing the Indian market.

It has signed an agreement with the $1.6 billion conglomerate CK Birla Group to manufacture cars and power trains under two joint ventures in the country.

The first joint venture which is primarily owned by the PSA group where Hindustan Motors Finance Corporation is the partner will manufacture cars. The second joint venture which has been established between the French car maker and AVTEC – in which both of then own 50% stake - will make engines and gear boxes.

The manufacturing plants for both the joint venture companies will be based in Tamil Nadu. It is understood the companies are targeting to make 100,000 vehicles per year.

Speaking to the press in Paris, CK Birla, Chairman, CK Birla Group, said: “We have embraced ‘Make in India for India and the World' for several decades and are among the early adopters of frugal manufacturing in the country. I am confident that the coming together of the latest state-of-the-art technology from the PSA Group and the engineering and manufacturing excellence of the CK Birla Group will benefit the automotive sector in India.”

Carlos Tavares, Chairman of the Managing Board of PSA Group, said: "Benefiting from the strong support of our Indian partner, the CK Birla Group, and a shared vision, this project is consistent with the strong execution of our Push to Pass strategic plan and represents a major step in PSA Group's worldwide profitable growth in key automotive markets.”

This is the third time the PSA Group is trying to establish its presence in India. One of the early entrants in the country after India opened its floodgates to FDI in 1991, it had tied up with the Premier Automobiles in the mid nineties. However, in 1996, Peugeot to exit the joint venture following huge losses that it incurred. Later, in 2011, PSA tried to enter India again to set up a manufacturing unit independently but could not succeed due to financial woes.

The transaction was facilitated by Trilegal that acted for Peugeot (led by Partner Yogesh Singh and supported by Counsel, Ramakant Rai, Senior Associate, Sarvesh Saluja, and Associate, Nimisha Mund) and Khaitan & Co (led by Partner, Bharat Anand) that advised the CK Birla Group.