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French carmaker PSA makes Indian comeback

Joint venture to manufacture vehicles and components

Carlos Tavares of PSA Group, left, signed a joint-venture agreement with India's C.K. Birla in Paris on Jan. 25.

NEW DELHI -- French automaker PSA Group, which owns Peugeot, Citroen, and DS Automobiles, is returning to India in a partnership with CK Birla Group, after a failure 20 years ago and another attempt in 2011.

PSA signed up to a partnership with the Indian conglomerate in Paris on Wednesday, taking a majority stake in the venture with CK Birla's Hindustan Motors Finance Corporation to assemble and distribute cars in India. A second agreement involves a 50:50 joint venture with AVTEC, another CK Birla Group subsidiary, to supply engines and transmissions.

In a joint statement, the companies said the partnership involves an initial investment of 7 billion rupees ($102.8 million) for vehicle and powertrain manufacturing made in plants in southern India's Tamil Nadu state.

The initial manufacturing capacity will be set at about 100,000 vehicles annually, and will be followed by incremental investment. PSA car sales will start in India by 2020, but brand specifics have not been disclosed.

Initially, the domestic market and some original equipment manufacturers will be targeted. "The performance of the industrial setup will be supported by a significant level of localization, in order to reach the necessary cost competitiveness," the statement 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," said Carlos Tavares, PSA's managing board chairman.

Push to Pass is part of PSA's five-year global motor manufacturing strategy. It is returning to India's automotive market, which is expected to produce 10 million cars by 2025 from 3 million in 2016. PSA at present is Europe's third largest carmaker after the Volkswagen and Renault groups.

Maruti Suzuki India, which is 56% owned by Japan's Suzuki Motor, specializes in low-cost cars and already has nearly half the domestic car market.

PSA has previously failed in India. In 1994, labor issues contributed to the failure of Premier Automobiles producing the Peugeot 309. In 2011, a proposed plant in the western state of Gujarat was a financial failure.

Chairman C.K. Birla told reporters in Paris that his group has embraced Make in India, a campaign fostered by the government of Prime Minister Narendra Modi. "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," he said.

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