French auto giant PSA Peugeot Citroen on Thursday signalled its return to India, announcing a new assembly plant in the west of the country as part of wider plans to sell more cars outside Europe.Europe's second-largest car maker said it had signed a deal with the state government of Gujarat to build a $928-million (650-million-euro) factory at Sanand capable of turning out an initial 170,000 vehicles a year.
Some 5,000 new jobs are expected to be created at the 243-hectare (600-acre) site, which will also house an engine and gear box manufacturing facility, with the first cars expected off the production line in two years' time.
Peugeot spokesman Marc Bocque said the company was now better placed to gain a foothold in India than in the 1990s, when it embarked on a joint venture with the domestic Premier Automobiles Ltd that was plagued by labour issues.
"We're coming alone. That's the first point," he told AFP. "Otherwise, since then we have gained huge experience in the international market. We have developed in Eastern Europe, Russia and China.
"Our experience is much different from what it was at the time. I believe this will certainly be a strong asset for our future presence (in India)."
More favourable conditions for foreign firms in India than in the 1990s, when the country's closed economy first opened up to outside competition, will also help, he added.
Peugeot aims to sell at least half of its cars outside Europe by 2015. In the first quarter of the current financial year, 44 percent of sales were outside the continent, the company said.
India is increasingly being eyed by international auto makers, as its car market takes off on the back of an economic boom that has increased the disposable income of millions.
But industry data showed car sales slid almost 16 percent year-on-year in July, their biggest drop in nearly three years, as steeper borrowing costs due to interest rates hikes and inflation kept buyers out of the showrooms.
Rates of growth are still forecast to be 10 to 12 percent -- second only to China -- and Peugeot said it is banking on the situation being temporary.
"We have seen a slow down," admitted Bocque. "But we don't believe at all that it will be a long-term phenomenon."
The French car maker's move will see it join US auto giant Ford, which in July announced it was to invest $1 billion in a new assembly and engine plant, also in Sanand, 40 kilometres (25 miles) from the state capital, Ahmedabad.
India's Tata Motors already makes the world's cheapest car, the Nano, in Sanand, and the country's Japanese-controlled Maruti Suzuki, which has two factories in northern Haryana state, has also been linked with a move there.Other European manufacturers, like Germany's BMW and Volkswagen, already have a presence in India, with production units near Pune, some 100 kilometres (60 miles) east of Mumbai.
Bocque said Gujarat's location near target markets in northern and western India, plus the state government's offer of land, infrastructure and support saw it chosen over alternative locations in southern Tamil Nadu and Andhra Pradesh.
The Sanand plant is likely to see the launch in 2014 of the first locally-made Peugeot 508 model, adapted to suit the local market in terms of quality, comfort and handling, the spokesman added."The possibility, perhaps, of exporting right-hand drive cars" will be studied after that, he added."For us, India will be a key market. It's very promising. It will be by 2020 the biggest right-hand drive market in the world and probably the third-biggest market if you take all kinds of vehicles by 2020."