MUMBAI (Bloomberg) -- Mahindra & Mahindra Ltd., India's largest maker of tractors and SUVs, is in advanced talks to buy PSA/Peugeot-Citroen's scooter business, according to three people familiar with the matter. An announcement may be made soon, two of the people said, declining to be identified because the discussions are private.
Ruzbeh Irani, head of group communications at Mahindra, declined to comment, as did Jean-Baptiste Thomas, a spokesman for PSA.
The acquisition of PSA's motorcycle unit would give Mahindra, which began making scooters in 2008, access to western technology as it seeks to compete with Hero MotoCorp Ltd. and Honda Motor Co. in India's growing two-wheeler market.
Scooter sales in the country surged 23 percent in the year ended March. The sale would be the first big strategic step by PSA CEO Carlos Tavares, who took charge in March and is tasked with returning the carmaker to profit. The scooter business, which has posted losses for a decade, sold 79,000 vehicles last year, a gain of 8 percent. The unit employs nearly 500 people in France and 300 people at a joint venture in China. PSA closed an engine plant for the scooter business at the end of 2012, concentrating production at a factory in Mandeure in eastern France.
Tavares said on French radio RTL on Sept. 14 that the scooter business was a drag on the group and a solution to end the burden was in the works.
Mahindra began making scooters six years ago after buying Kinetic Motor Co. to boost sales in a country where two-wheelers outsell cars by about six-to-one. Scooter sales in India have been rising as demand for personal transportation increases in Indian villages, especially for women. Mahindra's two-wheeler sales almost doubled in the year ended March. Hero and Honda Motorcycle & Scooter India Pvt. together control about two-thirds of India's two-wheeler market, the world's biggest after China. To tap growing demand, Honda is building a dedicated scooter factory in the state of Gujarat to be completed in the year ending March 2016, Keita Muramatsu, the head of the company's Indian motorcycle business, said in New Delhi last week.