Peugeot plans expansion into India

Peugeot plans expansion into India

PSA Peugeot Citroën plans to expand into India and build a mid-size saloon car as part of a broader plan to build its business overseas and reduce its reliance on Europe’s anaemic car market.

The French carmaking group made the announcement as it reported an expected return to profitability in 2010 and predicted higher earnings this year, supported largely by its business in faster growing emerging countries.

Peugeot also said that it expected to repay by the end of April the remaining €2bn ($2.7bn) of a €3bn French government loan it took during the financial crisis in 2009. Gregoire Olivier, who heads the company’s Asian business, said that the move into India “reflects our ambition to become a global player”.

Peugeot said that it was still evaluating where it would build the car.

Peugeot – which has been slower than competitors, such as Volkswagen, to expand into emerging markets – had until now concentrated mainly on South America, Russia and China, where its joint venture with carmaker Dongfeng contributed €159m to its 2010 net income.

The group aims to generate 50 per cent of its sales outside Europe by 2015, compared with 39 per cent last year. Peugeot, Europe’s second-largest carmaker after Volkswagen, reported full-year net income of €1.1bn, compared with a net loss of €1.2bn in 2009, when the financial crisis pummelled car sales.

Its second-half operating result was lower than most analysts’ expectations.

“Peugeot’s results are a harsh reminder of just how miserable the business of mass-market carmaking in Europe has become,” Sanford Bernstein analyst Max Warburton wrote in a research note.

Peugeot’s French rival Renault recently said that the European market was in a “long-term decline” and would not return to its pre-crisis sales levels reached in 2007 before 2016.

Peugeot said that it expected the European market to be “challenging” in 2011, and that China’s car market would grow 10 per cent, Latin America 4 per cent, and Russia by 15 per cent.

The company said that its global business would grow thanks to a second joint venture in China with carmaker Chang’an that was concluded last year and its expansion into India.

Peugeot said that it would pay half of the €2bn remaining balance on its government loan by end-February, and the other €1bn by end-April.

When France’s government approved the loan and another €3bn for Renault in February 2009, it linked the bail-out to producers’ preservation of jobs in France.