Citroen Exits Australia After Selling Less Than Ferrari, Will India Be Next?

French automaker Citroen has been in the news for announcing its exit from Australia, a market that it has had presence for over 100 years. Citroen’s decision to exit Australia has to do with abysmal sales. The Stellantis-group owned automaker just sold 87 cars in Australia so far this year, and that number’s lower than that of Ferrari (138 units), Aston Martin (96 units), Bentley (123 units) and Lamborghini (161 units).

Clearly, operating in Australia makes no sense for Citroen given the low volumes, and that’s why the French brand has called it quits. In India too, Citroen remains a bit player when it comes to volumes, holding just about 0.1 % of the market, with monthly sales averaging 660 units. This has led to social media chatter on whether India will be the next market that Citroen will exit from.

Don’t worry, that’s not happening anytime soon. Here are 6 key reasons why Citroen’s expected to stay back in India, and grow its business significantly.

Citroen’s in India for the long haul

Citroen took its time to enter India. After two false starts – once in 2009 that was aborted due to the global financial crisis, and in 2011, again aborted due to unknown reasons – Citroen finally entered India in 2019 by buying Hindustan Motors’ Tiruvallur factory near Chennai.

While the Tiruvallur factory sees Citroen building a range of cars including the C3 hatchback, the C3 AirCross compact SUV, the C5 AirCross mid-sized SUV and the recently-launched Basalt SUV Coupe, the French brand also has a thriving engine and gearbox manufacturing facility at Hosur. The engine and gearbox facility was started in 2017, in a joint venture with the CK Birla group.

This facility doesn’t just makes engines and gearboxes for Citroen’s Indian line-up but also exports a large chunk of production. Citroen has also begun exporting cars to global markets from its Tiruvallur factory. In fact, the French brand exported more than 500 units of the eC3 electric hatchback recently, and going forward more exports are in the pipeline.

So, Citroen plans to leverage India’s advantage as a low cost-high quality manufacturing hub to keep its factory operating at optimum levels, and this has been has the playbook of many foreign automakers such as Nissan, Volkswagen and Renault. In fact, this strategy of exporting cars is what has saved these automakers from losing too much money in India. And Citroen’s similar approach is one big reason why we think the brand will stay back here.

Citroen’s got conservative targets

After investing around 2,700 crores in its Indian operation (which is about 350 million US dollars), the French brand is playing quite conservatively. In contrast, Ford and General Motors invested billions of dollars in India, and had to pull the plug when the losses just became too big to recover from.

Carlos Tavares – the global CEO of Stellantis (the company that owns Citroen) – has emphasized that Citroen plans to sell about 1 lakh cars in about 6 years (2019-2025). If the Basalt manages to bring in at least 1,000 units a month, Citroen could well be within reach of this target. With both conservative sales targets and also a small-ish (for an automaker) investment, Citroen is quite well placed to stay in the game for a long time.

An expanding product line up

Like most foreign automakers, Citroen took the top-down approach in India, introducing the C5 AirCross as its first, and most premium offering. Following the locally assembled C5 AirCross, Citroen has launched a slew of mass market offerings – all aimed at decent sales numbers. The C3 hatchback, the eC3 electric hatchback, the C3 AirCross compact SUV and most recently the Basalt SUV coupe, are meant to shore up volumes for the French car maker.

With keen pricing for the Basalt, which is India’s most affordable SUV Coupe, Citroen is expected to more than double its sales. If Citroen manages to average about 1,500-2,000 units a month, it will well be on its way to achieving total India sales of 100,000 units in 6 years of operations. Fleet markets have also been bringing decent numbers for Citroen, whose eC3 electric hatchback is finding takers from ride-hailing apps and electric taxi start-ups.

Citroen has sold a little over 18,000 cars in India, and has an order book for 7,000 more units for the eC3 electric hatchback. The launch of the Basalt SUV coupe, and the refreshed versions of the C3 hatchback and C3 AirCross SUV following market feedback, should help it come closer to the 1 lakh sales target by the end of 2025.

Big course correction in distribution

Citroen bet big on selling cars digitally in India, a strategy that just didn’t take off. The automaker has now corrected course, and is on its way to establish physical dealerships across the length and breadth of India. Distribution has been a big pain point for Citroen in India as the brand remains relatively unknown, and inaccessible to large segments of the market.

By just establishing more physical dealerships, Citroen can reach a lot more customers in rural and semi-urban India – who are likely to appreciate the no-nonsense range of cars that it sells here. Citroen cars’ key attributes such as durability, great ride quality, sharp pricing and just-the-absolutely-necessary features may work quite well in price-sensitive parts of Indian market.

By the end of 2024, Citroen plans to set up no less than 200 touch points (sales and service centers) across India. The current number stands at 58. The near tripling of sales and service touch points will mean that Citroen will be present in at least 140 micro-markets of India, which should give it at least 1,500-2,000 monthly unit sales considering at least 10-15 monthly sales per market.

Responsive to market feedback

Companies fail not because they can’t take action, but they fail because they take inappropriate action. Citroen has demonstrated that it has its ears close to the ground, and is responsive to market feedback. While the shift from digital to physical showrooms is one big change, the other big one is with respect to its cars.

While Citroen cars have been criticized for skimping on features that are now expected as standard by Indian customers, the automaker has gone back to the drawing board and revamped its entire line up of cars. For instance, the C5 AirCross SUV is better equipped than before and so is the C3 hatchback. The Basalt is priced well, and has a decent set of features right from get-go. Overall, Citroen seems to be listening to customers, and making amends quickly, and this should help the company steadily scale up sales.

Finally, India’s very different from Australia

Image courtesy UniqueCars

In Australia, Citroen never really had a significant manufacturing operation going on. In fact, the only Citroen car to have meaningful assembly in Australia was the ID19, and this was in the 1960s. Even in that case, it was a contract manufacturer, Continental and General, who did the assembling.

Cut to now, Citroen’s tiny operation in Australia is run by a private importer called Inchcape, who found it unviable to continue operating the brand given the low and fast-dwindling volumes.

So, India is totally different from Australia. Here, Citroen has a much bigger market, a thriving export business and also a well-oiled manufacturing set-up. Clearly, the French automaker is here to stay.