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Peugeot’s Opel buy won’t be a threat to Indian carmakers

Swaraj Baggonkar
Chillicious NewsPSA Group, of which car brand Peugeot is a part, today announced the deal to buy General Motor’s German auto brand Opel for USD 2.3 billion.

The deal, which also includes the buy-out of British-brand Vauxhall, makes the French car group the second biggest in Europe after German giant Volkswagen.

Indian car makers, however, have little to worry about as it is unlikely that PSA will bring Opel to India at least anytime soon. The German brand has a fairly negative brand recall in India especially after its abrupt exit from the country more than a decade ago.

General Motors sold three models under the Opel brand in India – Corsa, Astra and Vectra – which were launched mid and late 1990s. By 2006 US-based General Motors ordered the pull-out of Opel from India and replace it with Chevrolet after several attempts to revive its sales.

Shoddy service response, expensive spare parts, dated car designs and fierce competition from Maruti Suzuki and Hyundai hit Opel operations hard. Losses sky-rocketed for GM before the company decided to pull the plug on the troubled brand.

Customers were promised spare parts by GM till 2010. However, it did not arrest the free fall in the value of used Opels in India thereby further denting its brand recall value.

Opel presently has several three-door and five-door compact cars, sedans, vans and sports utility vehicles in its line-up. However, they are expensive when compared head-to-head with Indian counterparts from Maruti, Hyundai etc.

Experts say it will be a monumental challenge for PSA to match the cost-efficiencies of Maruti Suzuki, Tata Motors and Hyundai, who control three-fourths of the domestic market. Companies like General Motors (Chevrolet), Nissan, Toyota, Honda, Volkswagen have failed to compete against the three established companies.

Opel is sold mostly in Europe with only a handful of markets in Africa, Asia, Middle East and Latin America. Opel is absent from US, China and India together which control more than half of the world’s automotive demand.

Peugeot itself has had a chequered past in India. Having failed to secure a confident start after its late 1990s debacle with partner Premier, Peugeot is busy taking another shot at the Indian market.

PSA has inked a deal to use the manufacturing facility of Kolkata-based Hindustan Motors, India’s oldest automotive company, to produce its own range. The Chennai-based factory will start producing Peugeot cars before end of this decade. PSA has promised to pump in Rs 700 crore towards this deal. It has also bought brand rights of Hindustan Motors’ Ambassador.

“Peugeot will want to focus on putting its own brand in order in India rather than get a troubled brand like Opel to India and jeopardize its own chances,” said a Mumbai-based auto expert.

Further, Britain’s Vauxhall brand is largely centered on the European market and is an alien brand to Indian car buyers. Vauxhall merely sells GM cars rebadged under its own brand.