Peugeot ditches Gujarat Factory plans

Peugeot had earlier announced that it will build a full production facility at Sanand, Gujarat (Link to Post (Peugeot coming back to India *Update* Manufacturing facility to be located in Gujarat)). Well, that plan is history now. Reason?

Peugeot is facing really tough times in Europe, which is its primary market. Demand continues to wane in France & other European countries. The current cash reserves simply do not permit any substantial investments in India. The original plan was to invest to the tune of Rs. 4,000 crore toward the Gujarat factory. Peugeot recently entered a global alliance with General Motors to save on costs; that is, joint purchasing of components and development of future cars & platforms. GM also gets a 7% stake in Peugeot.

Reuters quotes Gregoire Olivier, head of Peugeot's Asian operations, as stating "We're not going to move forward by building our own factory as we'd planned to...We now have GM as a global partner, and GM has factories in India, so we're obviously reviewing our plans from the top. There are a lot of other ways to enter India now that they don't require us to put 600 million Euros on the table"

Peugeot's marred reputation in India might have triggered doubts over the project's viability. Rolling cars out from GM's facility substantially lowers the required investments and, more importantly, the risk exposure if things don't work out for Peugeot India. Will the Indian customer put money down on a brand that failed to honour all delivery commitments of the 309 sedan, and didn't refund booking deposits either?

It can be safely concluded that Peugeot's cars will be assembled at GM's facilities at Halol (Gujarat) and Chakan (Maharashtra). The product range being considered is the Peugeot 207 & 508. GM India might not have a problem with assembling the 508 luxury sedan, but will it build the 207 hatchback that can very well compete with its own hatchback range?

Interesting times ahead.

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