Peugeot Citroen says may build cars in India with GM

An employee works inside a plant of General Motors India Ltd. at Halol, about 150 km east of Ahmedabad August 28, 2009.

BEIJING (Reuters) - PSA Peugeot Citroen (PEUP.PA) said it may build cars in India with General Motors (GM.N), its new global alliance partner, effectively scrapping a planned 650 million euro investment in its own factory.

The companies will explore ways to use GM plants to support Peugeot's long-heralded return to the Indian market, said Gregoire Olivier, head of Asian operations for the Paris-based automaker.

"We're not going to move forward by building our own factory as we'd planned to," Olivier said in an interview at the Beijing auto show.

"We now have GM as a global partner, and GM has factories in India, so we're obviously reviewing our plans from the top," he said. "There are a lot of other ways to enter India now that they don't require us to put 600 million euros on the table."

GM India Vice President P. Balendran said in a statement there were "no plans currently for GM and Peugeot to build cars together in India", adding: "It's too soon to say how (the alliance) will impact India and the Asia Pacific region."

The U.S. car maker has an Indian joint venture with China's Shanghai Automotive Industry Corp (600104.SS) and sells models including the Chevrolet Spark, Beat, Sail and seven-seater Enjoy. GM has Indian plants near the western city of Mumbai and Halol, in Gujarat.

Peugeot exited India in 1997 after the failure of an earlier joint venture with Premier Automobile Ltd., and had been seeking to re-enter the fast-growing market for at least two years before announcing the plant investment in Gujarat state last September.

Amid mounting European losses, Peugeot flagged unspecified "timetable adjustments" to the project in January, two months after breaking ground at the factory site.

Peugeot is likely to stick to its earlier plan to enter the Indian market with a small car and a compact, Olivier said, declining to give details.

GM and Peugeot announced their broad-based alliance in vehicle development and production on February 29, along with a 1 billion euro Peugeot share issue that saw Detroit-based GM acquire a 7 percent stake in Europe's second-biggest automaker.

The partnership with Peugeot is essentially a "Euro-centric play", GM Chief Executive Dan Akerson told reporters in Beijing, adding that cooperation opportunities also existed in Asia, South America and in specific vehicle technologies.

(Additional reporting by Ben Klayman; Editing by Ken Wills and Alex Richardson)