Leaving India: The Peugeot Story

As Peugeot was one of the first automobile MNCs to enter India, the early mover advantage was expected to help the company make its mark in the Indian automobile market. According to reports,¹ Peugeot was set to achieve cash breakeven within two years and to begin generating profits by 1998. Peugeot decided to enter the Indian market with its passenger car model, Peugeot 309, as the car was believed to be the best suited for Indian terrain. Production began at the Kalyan plant and the car was launched in 1995, positioned in the mid-size segment, against Daewoo's Cielo and Maruti's Esteem. The initial response to the car was positive, with the company selling around 10,000 units in the first year of the launch.

Problems surfaced with PAL regarding certain strategic issues including infusion of fresh funds and violation of the PAL-Peugeot MoU. By 1997, the company's accumulated losses touched over Rs 3 billion. In November 1997, Peugeot announced its decision to exit from the joint venture and leave the Indian market. The news came as no surprise, as there had been several media reports about how Peugeot was finding it difficult to survive in the Indian market. Peugeot of course claimed that it was moving out of India only because of a policy decision by its parent company to concentrate only on European markets. Pegueot's exit from the Indian market opened up a debate on a host of issues including the company's blunders, and more importantly, the survival prospects of MNC players in the newly-liberalized Indian economy.