PARIS -- Citroen is counting on design and lower-cost models to break into the tough market of India.
The French brand plans to launch sales in India no later than the end of 2021. Citroen's move into India is part of a strategy by parent PSA Group to reduce its dependence on sales in Europe, with Peugeot returning to North America and Opel making a push into Russia.
As part of that strategy, PSA is creating a range of lower-cost vehicles for international markets, similar to Renault's Global Access program for affordable cars such as the Logan, sold under the Dacia or Renault brand depending on the market.
Citroen's models for India will be the first in the lower-cost range, CEO Linda Jackson told Automotive News Europe.
Jackson declined to give further details, except to say that they would be "appropriate and relevant for the Indian customers."
Small SUVs such as the Renault Kwid have been successful in India, whose buyers prefer hatchbacks and crossovers to sedans.
Citroen's cars for India will be built as part of two joint ventures that PSA set up in 2017 with CK Birla Group, one of which is a manufacturing partnership with Hindustan Motor Financing Corporation for the assembly and distribution of PSA vehicles in India. At the time of the announcement, PSA said it would produce up to 100,000 vehicles annually.
The other, PSA Avtec Powertrain, has just started production of engines and gearboxes at a factory near Bangalore, with a capacity of 300,000 engines and 200,000 gearboxes annually.
PSA CEO Carlos Tavares said the Avtec plant had just started exporting transmissions, and was "extremely, extremely profitable." Tavares said the savings from producing in India had already made that joint venture self-sustaining, Tavares said at the Geneva auto show earlier this month.
PSA has tried in recent years to break into India. A joint venture with Premier to build Peugeot 309s from kits foundered in the late 1990s, as did a similar one with Tata to build Peugeot 307s. A plan to invest 650 million euros in a factory in Gujarat fell apart in 2012 amid PSA Group's financial issues.
As part of the CK Birla arrangement, PSA also acquired the rights to the Ambassador brand nameplate. The Ambassador was a Morris Oxford-based sedan produced for decades by Hindustan Motor, and more than half a million are still on Indian roads today, mostly as taxis.
Jackson said Citroen and PSA were considering whether and how to use the Ambassador name. "I want to be very careful how we use the name because you need to be credible when you use it and not just assume that everybody will say, 'Yes,' that's a good idea."
The potential for growth in India is huge, Jackson said.
"All of the forecasts for India say the market is expanding exponentially," she said, with passenger car sales of about 3.6 million vehicles in 2018 expected to grow to six million by 2025, which would make it the third-largest market after China and the United States.
IHS Markit projects annual growth of 7 percent and a total passenger car and light-commercial vehicle market of 9.5 million units by 2030.
Four brands -- Maruti Suzuki, Tata, Hyundai and Mahindra and Mahindra -- together have more than 80 percent of the Indian market, with the remaining 20 percent held by a mix of European, Asian and North American brands, many of which have seen their fortunes rise and fall.
Jackson said Citroen would stand out with its design, as well as local production and a focus on initial quality and after-sales service.
"We think that Citroen's unique styling offers something slightly different, and it could be a good way for us to have a faster impact on the market," she said.
Puneet Gupta, associate director of automotive forecasting at IHS Markit in India, said Citroen had a chance to succeed but that it is hard to compete with the top brands.
Existing brands "understand the country very well, they can price their products very well, and they have a solid network base,” he said.
Still, there is room for new players as the market grows and space opens up for electrification, a government priority to reduce dependence on foreign oil, Gupta said. “That doesn't mean that it will be a cakewalk; it will be very tough and challenging, but nevertheless there are real disruptions,” he said.
Anil Sharma, associate director for automotive and transportation at Marketsandmarkets Research, said India’s leading automakers were able to quickly respond to technical innovations, so Citroen would have to build “a strong and evenly spread product pipeline, and develop positive word of mouth through after sales service.”
“There is certainly some space left for new brands and OEMs in the Indian market,” he said. ”However, a lot will depend on which segments it decides to play into as well as on its price, positioning, and sourcing strategies.”
Sharma suggested that Citroen’s best chance is to focus on low-volume, high-price models which primarily sell in urban markets. “Competing head-on with the established players in the mass-market segments is unlikely to yield positive results,” he said.
Jackson said it was important for Citroen to listen to what Indian customers wanted rather than try to impose European tastes or designs on the market.
"We need to have the mindset that we are going into India for Indians, and that's why we have a local team that is defining exactly what should be in vehicles in terms of technology," she said. "It may sound a bit blunt. It's an important point, because there is sometimes an arrogance of Europeans that says, 'I've been very successful in Europe, so I'm going to take exactly the same product and put it into India.' Well, that's not going to work."