MUMBAI (Bloomberg) -- Mahindra & Mahindra Ltd. will buy a 51 percent stake in PSA/Peugeot-Citroen's scooter business, giving the Indian tractor and SUV maker access to European technology to expand its two-wheeler operations.
The deal is among the first major strategic steps by PSA CEO Carlos Tavares, who took charge in March and is tasked with returning Europe's second-largest automaker to profit. PSA's scooter business has posted losses for a decade as it struggles to compete with Piaggio, the European leader in scooters.
Mahindra unit Mahindra Two Wheelers Ltd. will invest 15 million euros ($18.9 million) into Peugeot Motorcycles, the Mumbai-based company said today in a stock exchange filing.
Mahindra, which began making scooters in 2008 after acquiring Kinetic Motor Co., is seeking to compete with Hero MotoCorp and Honda in India's growing two-wheeler market. Sales of scooters surged 23 percent in the year ended March in the country where two-wheel vehicles outsell cars by about six to one.
PSA sold 79,000 scooters 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 that a solution to end the burden was in the works.
Peugeot has been manufacturing motorbikes and scooters since 1898. It peaked in the 1970s with the Peugeot 103 moped, of which it sold a record 550,617 in 1974 alone.
Reuters contributed to this report