Peugeot to Invest 650 Million Euros to Build India Car Plant

Peugeot to Invest 650 Million Euros to build India Car Plant

I found an article that combined my love for the automotive industry and accounting concepts. It involves a car manufactures struggle to remain dominant in a stagnating economy, by reaching out to different markets.

Europe’s second largest car manufacturer, Peugeot has announced plans to establish a new factory in Gujarat, India. This new facility will be responsible for producing a compact and mid-size model; reinforcing the fact that many automotive manufacturers are steering away from making fuel hungry trucks and SUV’s. The new plant is projected to have an annual capacity of 170,000 vehicles a year. This will aid in the company’s overall strategy to compensate the stagnating European passenger car market.

The state of Gujarat is quickly being recognized as the Detroit of India. Ford has set up a giant factory in the area with an estimated annual capacity of 240,000 vehicles. Even Suzuki is looking towards Gujarat to set up a new operational facility. The city of Sanand, the nearest city, looks forward to the partnership and the growth these car companies will offer.

I selected this article because it incorporates many aspects of accounting in which we have already gone over. This is an example of a company purchasing a fixed asset for future use. I think with the current topics that we are on; it would be interesting to calculate the depreciation expense of this factory verses the value of the product they are offering.

This article offered a little insight into company strategy. The company projects a consistent decline in the European market, so they are building this factory to compensate for these future projections.

Sources:

Frost, Laurence. "Peugeot to Invest 650 Million Euros to Build India Car Plant." Bloomberg 01 SEP 2011: n. pag. Web. 3 Sep 2011. <http://www.bloomberg.com/news/2011-09-01/peugeot-to-invest-650-million-euros-to-build-india-car-plant.html>....