Mahindra Said to Be in Talks for Peugeot Scooter Unit

Mahindra Said to Be in Talks to Buy Peugeot’s Scooter Unit
Employees work on the production line of the Peugeot Metropolis motorcycle at PSA Peugeot Citroen’s factory in Mandeure. Peugeot closed an engine plant for the scooter business at the end of 2012, concentrating production at a factory in Mandeure in eastern France. Photographer: Sebastien Bozon/AFP via Getty Images

Mahindra & 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. Mahindra doesn’t comment on “speculative” news reports, it said in an e-mailed statement late yesterday. Jean-Baptiste Thomas, a spokesman for Paris-based Peugeot, declined to comment.

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 percent 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 percent. The unit employs nearly 500 people in France and 300 people at a joint venture in China.

“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.”

Production Cut

Peugeot, which has struggled to compete with European scooter leader Piaggio & C. 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, spokesman Frederic Bart said.

Tavares said on French radio RTL on Sept. 14 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 percent to 1,372.35 rupees in Mumbai trading yesterday, while Peugeot fell 2.9 percent to 10.48 euros 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 31.

The Indian manufacturer’s top-of-the-line scooter is the 125cc Duro DZ, which starts at about 44,000 rupees ($720), excluding taxes. Peugeot’s Metropolis costs 8,749 euros ($11,300). The French company’s cheapest model is the 50cc Mokick for 969 euros.

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.

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