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Mahindra began making scooters six years ago after buying Kinetic Motor. Photo: Bloomberg
Mahindra began making scooters six years ago after buying Kinetic Motor. Photo: Bloomberg

Mahindra in talks to buy Peugeot’s scooter unit

Acquisition of Peugeot Motocycles would help Mahindra compete against Hero MotoCorp and Honda in India's two-wheeler market

New Delhi/Paris:Mahindra and Mahindra Ltd, India’s largest maker of tractors and sport-utility vehicles, 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 Paris-based Peugeot.

The acquisition of Peugeot Motocycles would give Mumbai-based 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% in the year ended March.

The sale would be among the first big strategic steps by Peugeot chief executive officer Carlos Tavares, who took charge in March and is tasked with returning Europe’s second-largest automaker to profit. The scooter business, which has posted losses for a decade, sold 79,000 vehicles last year, a gain of 8.2%. The unit employs nearly 500 people in France and 300 people at a joint venture in China.

Production cut

“This shows that Tavares is willing to get rid of Peugeot’s remaining peripheral and loss-making activities in order to focus on its core business," said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler. “Plus, they still need some liquidity."

Peugeot, which has struggled to compete with European scooter leader Piaggio and Co. SpA of Italy, closed an engine plant for the scooter business at the end of 2012, concentrating production at a factory in Mandeure in eastern France.

Part of its turnaround plan was the three-wheeled Metropolis, which was introduced last year. The original target of making 7,000 units a year has been scaled back to 4,000, spokesperson Frederic Bart said.

Tavares said on French radio RTL on 14 September that the scooters business was a drag on the group and a solution to end the burden was in the works.

Mahindra shares rose 0.2% to Rs1,372.35 in Mumbai, reversing earlier declines. Peugeot pared losses and was down 1.8% at €10.61 at 12.26pm in Paris.

Village transport

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.

The Indian manufacturer’s top-of-the-line scooter is the 125cc Duro DZ, which starts at about Rs44,000 ($720), excluding taxes. Peugeot’s Metropolis costs €8,749 ($11,300). The French company’s cheapest model is the 50cc Mokick for €969.

Hero MotoCorp and Honda Motorcycle and Scooter India Pvt. Ltd (HMSI) together control 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. Bloomberg

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