Tough financial conditions force Proton, Peugeot, Citroen, Kia to shelve their India plans
A fleet of carmakers such as Proton, PSA Citroen, Kia, Geely, and Chery seems to have shelved their plans to drive into India, and has instead reset destination to other emerging markets such as China and Brazil. French carmaker Citroen, which had zeroed in on Sanand in Gujarat as the location for a Rs 4,500-crore project, for example, has officially removed India from its latest international deployment chart of its future manufacturing plants that included Buenos Aires in Argentina and Kaluga in Russia.
Others such as French carmaker Peugeot, Malaysia's Proton, Korean brand Kia and Chinese firms Geely and Chery, too, are reviewing their India plans due to lack of vehicles that can compete in the price-sensitive Indian car market, or because falling sales in primary markets have hit their financials.
"The Indian car market is getting competitive with too many brands, and getting a reasonable market share will be tough for any new entrant," said VG Ramakrishnan, MD of consulting firm Frost and Sullivan.
Citroen, which planned to roll out a mid-sized sedan in the country in 2014, shut down its office in Mumbai recently. An email query sent to PSA Citroen days ago was not replied to till Sunday evening.
Peugeot, which in February 2011 said it was re-entering India after more than a decade, put the plan on hold last year due to the grim financial situation following falling sales. "The group is currently evaluating the scheduling of the project," a company spokesperson had told ET in 2012.
Proton, which had negotiations with Delhi-based Hero Group for a possible joint venture, too is facing tough times in its primary market. "India was very much on the radar, but it came after China and Iran," said BVR Subbu, a former director of Proton.
Chinese firms Chery and Geely, which have made several attempts to enter India, too may have slowed down because of lack of diesel vehicles in their portfolios. "With the Chinese car market being predominantly of petrol and automatic vehicles, it has made it even more difficult to bring in suitable products for India," said a person who has worked closely with these companies.
While small cars account for 60% of car sales in India, 25-30% of this segment is diesel driven. Lawrence Ang, executive director at Geely Automobile Holdings, said the company has not set any time for India entry. "Geely has always been interested to explore opportunities in India and has been working on the plan. So far we do not have a definite timetable yet," he said.
Chery, which has a joint venture project with Jaguar Land Rover, may ultimately make its way to India through JLR. The company did not respond to an email query.
Kia Motors, a subsidiary of Hyundai, did not find the Indian market lucrative enough. Kia, which is positioned lower than the Hyundai brand in most markets, found it difficult to find the right product positioning for the Indian market. "This made the entry point for Kia higher than Hyundai, and also there was a possibility of cannibalisation of Hyundai sales," a person close to the company said.