PSA Peugeot Citroen has reached a deal with the CK Birla Group that will see the French carmaker return to the Indian market by 2020.
PSA said on Wednesday that it will make an initial investment close to 100 million euros ($100 million) in capital expenditure for car and powertrain manufacturing in the state of Tamil Nadu.
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PSA chief executive Carlos Tavares said the deal "represents a major step in PSA Group's worldwide profitable growth in key automotive markets."
The two groups plan to start with an annual production of 100,000 cars.
PSA decided to leave India in 1997 by ending a partnership with manufacturer Premier Automobiles Ltd. It said the Indian car market is expected to reach 8 to 10 million vehicles by 2025 from a current 3 million.