Why the JV failed:
Hailed as one of the best joint venture agreements of the time, the Doshis hived off their Kalyan plant (which manufactured Premier 118 NEs) to PAL Peugeot, which gave them an equal 32 per cent stake in the new company. The French auto firm had to bring in Rs 84 crore as its part of the commitment. The company was among the first entrants in the mid-sized car segment and offered a competitively priced vehicle both in petrol and diesel versions.
But even before the vehicle could be pushed into the market, the Kalyan plant was crippled by a five-month labour strike that paralysed operations and edged the new entrant out of the market. Meanwhile, Cielos, Opels, and Ford Escorts started sweeping the market. And the Doshis happily entered into a joint venture with Fiat to manufacture the Fiat Uno in India. This turned out to be the last straw for Peugeot.
Peugeot saw red, as this would be in clear contravention of the non-competition clause of the PAL-Peugeot agreement. The French side slapped a suit on PAL. Doshi argued that PAL Auto's Uno model, priced at about Rs 3.6 lakh, would not compete with mid-size Peugeot 309 priced at Rs 5.5 lakh. But the Mumbai High Court agreed with Peugeot. Peugeot's moral victory, however, was no cause to rejoice. The future of the joint venture itself was at stake. PAL-Peugeot's accumulated losses at Rs 165 crore had been threatening to wipe its net worth of Rs 261 crore, making it a ripe case for BIFR.
Source: http://www.outlookindia.com/article.aspx?204678
I had an annual subscription for Auto India magazine, and it had done a comparision between the 309, Cielo and the Esteem. And the Peugeot 309 was voted as the 'most fun to drive car'.
Lack of snob value also contributed to the failure of this car.
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