Peugeot to sell more assets; this time to Mahindra

The ailing French giant, Peugeot Citroen, seems to be still deep in trouble as it tries to divest itself of further loss; in an attempt to stop the hemorrhaging of cash, it has now been confirmed that Indian tractor manufacturer, Mahindra and Mahindra Ltd, has made a binding offer to buy a 51% stake in Peugeot’s chronically sick scooter business.

After eating up several other competitors, such as Citroen and Simca, Peugeot has been in dire need to stem the losses they have been incurring ever since the 2008 financial crisis. Already the once proud and privately-owned French car maker has sold significant amount of equity to Dongfeng of China and, in effect, the Peugeot family lost control of their company. Of late, the company has had to shed French jobs, which under French labour laws is a very difficult exercise.

The Peugeot scooter business, which is based in Paris, has some 488 employees in France and 300 in China. It had been enjoying something of a renaissance with sales increasing by 8.2% in 2013 to a total of 79,000 units. Peugeot Scooter had been hoping that sales of its rather quirky three-wheeler, called the Metropolis, would hit 7,000 units per year but this target has been scaled down to 4,000 units.

Mahindra hope to be getting instant access to European technology after they pay €28 million for the 51% share. Of this money, it is thought that about €15 million will be ploughed back into the company with the hope that they will start to penetrate into more markets, especially in Latin America and also India, where the 13 models, ranging from 50cc up to 400cc, that are currently on offer will also be launched.

“We will have a two brand strategy. We will position Peugeot as a premium brand in the market and Mahindra as a mass-market brand. There are clear opportunities for synergies between Mahindra two-wheelers and Peugeot scooters. We want to focus on building the brand, global expansion and investing in new products and synergies,” a Mahindra spokesperson said.

Currently the Indian market is dominated by Hero Motocorp and Honda Motor Corp. Scooter sales surged by more than 23% last year in a country where two-wheeled vehicles outsell four-wheeled vehicles by six to one; so perhaps this is a very smart move by Mahindra.

image: peugeotscooters.com