PSA Peugeot Citroen may revive a plan to set up a manufacturing facility in India to tap surging car demand in the country.

Peugeot may spend about EUR700m (US$881m) on the factory with annual production capacity of 100,000 cars in the southern state of Andhra Pradesh, a source told Bloomberg News. Peugeot executives intend to meet this month to decide on the project, before seeking approval from the carmaker’s board and starting negotiations with the state government, the source said.

The would see Peugeot’s re-entry to India over a decade after the carmaker exited a local venture. Renault will resume selling cars there next year after opening a Chennai factory.

Peugeot is studying opportunities in India, PSA spokesman Pierre-Olivier Salmon told Bloomberg. There is no decision on India and no timetable for a decision, he said.

Peugeot may raise funds for the project from French banks, the Bloomberg source said.

The report said Peugeot decided to exit its Indian venture in 1997 after losses mounted and local partner Premier Automobile linked up with Fiat.

Peugeot and Premier each had a 32% stake each in the company, PAL-Peugeot, that built the 309.

Peugeot Citroen executive vice president Gregoire Olivier said on 2 March that the carmaker shelved its plans for India as it was negotiating with Mitsubishi Motors about a tie-up. Later that month, Peugeot broke off talks over a share swap with Mitsubishi.