Mahindra in talks to buy Peugeot's scooter unit: report

Mahindra and Mahindra Ltd, India's largest maker of tractors and sports-utility vehicles, is in advanced talks to buy PSA Peugeot Citroen's scooter business, reports quoting unnamed sources familiar with the matter said.

Peugeot scooterThere was no announcement from Mahindra of Peugeot. However, the reports said an announcement to this effect will be made soon.

For Peugeot, the scooter business has been a losing business for nearly a decade. The company managed to sell 79,000 vehicles last year.

The sale would be among the first major steps by Peugeot chief executive Carlos Tavares, who took charge in March and is tasked with returning Europe's second-largest automaker to profit.

The acquisition of Peugeot Motocycles would give Mahindra, which began making scooters in 2008, the necessary technology to compete with rivals Hero MotoCorp Ltd and Honda Motor Co in the country's growing two-wheeler market.

Scooter sales in India surged 23 per cent in the year ended March 2014.

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. As a turnaround plan, it introduced the three-wheeled Metropolis last year. But there too it had to scale back the original target of making 7,000 units a year to 4,000, spokesperson Frederic Bart said.

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

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 2014. Its top-of-the-line scooter, the 125cc Duro DZ, 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. Honda is building a dedicated scooter factory in Gujarat to be completed in the year ending March 2016 while HeroMotocorp is setting up a new plant in Andhra Pradesh.