European auto major PSA Group on Wednesday announced a partnership with the CK Birla group to re-enter the Indian market and earmarked an initial investment of 100 million euros (around Rs 700 crore) to set up vehicle and powertrain manufacturing in Tamil Nadu.
The tie-up entails two joint-venture agreements between the companies of the two groups.
"As part of the first agreement, the PSA Group will hold a majority stake in the joint-venture company being set-up with HMFCL (Hindustan Motor Finance Corporation Ltd) for the assembly and distribution of PSA passenger cars in India," the two firms said in a joint statement.
Under a second agreement, a 50:50 joint-venture is being set-up between the PSA Group and AVTEC Ltd for manufacture and supply of powertrains. "The manufacturing sites for both vehicle assembly and powertrains will be based in the state of Tamil Nadu," it added.
The long term partnership entails an initial investment in capital expenditure close to 100 million (Rs 700 crore) for vehicle and powertrain manufacturing in Tamil Nadu, the statement said. The initial manufacturing capacity will be set at about 1,00,000 vehicles per year and will be followed by incremental investment to support a progressive ramp-up of the long term project, it added.
The manufacturing capacity for powertrains will cater to the domestic market needs and global OEMs. The performance of the industrial set-up will be supported by a significant level of localisation, in order to reach the necessary cost competitiveness, it added.
PSA Group Chairman Carlos Tavares 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." CK Birla Group Chairman CK Birla said: "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."
This long term partnership will allow both companies to participate in the growth of the Indian automotive market, which is expected to reach 8 to 10 million cars by 2025 from current 3 million in 2016, the statement said.
PSA group, which sells Peugeot, Citron and DS, is no stranger to India, having entered into a partnership with the erstwhile Premier family resulting in joint venture Peugeot PAL India. However, it pulled out from JV in 2001.