MUMBAI, JAN 8: In a significant alliance, Tata firm Telco has joined hands with Europe's second largest car maker Peugeot-Citroen to develop a new mid-sized car exclusively for the Indian market. ``The new car would be based on a 3-box sedan on Citroen Platform II to be manufactured by Telco,'' the company said in a statement. "The two companies have agreed to complete the feasibility study over the next six months," the statement added. If approved by the Telco board, the car would be available only after 2003. ``The new car would be completely independent from the Indica platform and it's a technical joint venture,'' Rajiv Dubey, General Manager, Telco said ruling out any equity partnership. Telco's own mid-sized car Magna continues to be on schedule and it will be launched as per its earlier target of mid-2001. ``If the feasibility study gives green signal, we will make fresh investments in the car,'' Dubey said. ``The quantum of the investment could be decided only six months later,'' he added. The new car would be manufactured in Telco's Pune plant. The new car, if cleared by the study, could be even exported out of the country. On Monday, Telco shares fell 1.79 per cent to Rs 101.25 on the Bombay Stock Exchange while the main market closed down 1.51 per cent. The announcement was made soon after the stock markets closed on Monday. Peugeot had pulled out of India in the mid-1990s after its car joint venture, called PAL-Peugeot Ltd, with the Mumbai-based Premier Automobiles Ltd (PAL) failed to generate any revenues or profitability. Peugeot, which launched Peugeot 309 in India, even fought a bitter legal battle with the Doshis of PAL, finally sold its 32 per cent stake to PAL for Re 1 and got of India. The company's plant in Kalyan has since then closed down. Paris-based Peugeot has some of the best performing and good looking cars in Europe and is a market leader in France. The company's first attempt in India did not give it either market shares of profitability. Peugeot's second innings into India will depend on what product its offering and at what price considering that Ford, Hyundai and Honda have made deep inroads into the Indian mid-sized car market. Peugeot is also supplying diesel engines to Maruti for its Zen model. On the other hand, Telco was under tremendous pressure to find out a partner for its car business. Despite continuous efforts by Telco, the Indica was getting a negative ranking among the car owners over quality standards and its sales were fell in December as compared to November 2000. Telco, owned 10 per cent by DaimlerChrysler AG, has lost money in the past two quarters but has devised a major turnaround plan to get back to business. Daimler's representatives on Telco board are aware of the developments, officials said when asked about the reaction of DaimlerChrysler which is competing with Peugeot in Europe. Telco's turnaround plan includes a Rs 300 crore cost saving exercise through a voluntary retirement scheme and better treasury management. Analysts are expecting Telco to hive off its car business into a separate venture and sell a part of stake to a foreign partner to get better technology and focus on its commercial vehicle business. Tata Engineering, a recent entrant in the passenger car market, would contribute its competitive development technology and production processes as well as its understanding of the local market to the new car, a Telco statement said.
