French automobile major Groupe PSA, formerly known as PSA Peugeot Citroen, is likely to sign a memorandum of understanding (MoU) with the Tamil Nadu government to set up an R&D centre as well as manufacturing facilities through greenfield and brownfield projects. Groupe PSA had in January this year announced plans to return to the Indian market, after two failed attempts, following clinching car and powertrain manufacturing deals with the CK Birla group and acquiring the iconic brand, Ambassador, which was manufactured by Hindustan Motors.
PSA, maker of Peugeot, Citroen and DS cars, had said it would assemble vehicles in Tamil Nadu by 2020 under an initial $107-million joint venture investment with Birla-owned Hindustan Motor Finance Corporation Ltd (HMFCL). The partnership is also for building car engines and transmissions under a separate manufacturing deal with AVTEC, another CK Birla company, the groups had said in a joint statement then. PSA Peugeot Citroen had renamed itself as Groupe PSA in April last year.
The French company had earlier this year formed a JV with CK Birla Group for the Chennai plant. The tie-up was to make use of the Hindustan Motors plant in Chennai as its production unit. The Chennai plant currently produces vehicles for Mitsubishi and has capacity of 12,000 units a year. The Chennai plant of Hindustan Motors is a world class and state-of-the-art manufacturing facility which had been producing premium passenger cars in technical
collaboration with Mitsubishi Motors Corporation, Japan.
Shilpa Prabhakar Satish, executive vice chairperson, Tamil Nadu Guidance Bureau, the nodal agency for FDI into the state, said the state government will soon be signing an MoU with an European auto major which will set up an R&D unit and also do manufacturing through brownfield and greenfield projects. Though she refrained from naming the company, senior officials said Groupe PSA is indeed getting ready to sign on the dotted lines for setting up the R&D centre and the greenfield project, besides the the Hindustan Motors’ existing plant in Tamil Nadu which was taken over by the company.
Industry watchers said the French company would be investing around Rs 7,000 crore to set up the facilities in Tamil Nadu. PSA Group had withdrawn from the country in the late 1990s, ending a brief joint venture with Premier Automobiles that launched just one car. The second attempt in 2011 was too aborted. It even bought land in Gujarat for a factory, but could not proceed further, as Europe’s debt problems had made the continent’s companies cautious. The French auto major’s move will give a much-needed fillip to Tamil Nadu which has been loosing its edge due to political uncertainties and ease of doing business in recent times, analysts said.