French car maker PSA Peugeot Citroen plans to build a new car plant and launch a slew of new models in China to boost sales in the world's third-biggest and fastest-growing car market.

Yves Boutin, chief representative of PSA Peugeot Citroen in China, yesterday said the group would build a new manufacturing base with its Chinese partner Dongfeng Motor Corp.

The new plant will be a part of PSA Peugeot Citroen's existing joint venture with Dongfeng. The venture is based in Wuhan, capital of Central China's Hubei Province.

Boutin said details such as location, annual production capacity and investment size of the new plant would be revealed in July.

The French carmaker will introduce nine new models into the joint venture or Dongfeng Peugeot Citroen from 2006 to 2009, Boutin said.

The new plant and product plans seem to rule out the possibility of PSA Peugeot Citroen seeking a new Chinese partner in the near-term.

Last year, the French carmaker was reportedly in talks with Hafei Automobile Co Ltd Mitsubishi Motors' partner in Northeast China's Heilongjiang Province and Jinhua Youngman Group, a small privately-owned manufacturer of trucks and buses in Zhejiang Province.

Boutin said that annual sales of Dongfeng Peugeot Citroen would reach 300,000 cars in 2008.

The venture sold 140,000 cars in 2005, surging by 57.5 per cent year-on-year. This represented a sharp rebound from a 14-per cent tumble in 2004.

Dongfeng Peugeot Citroen announced earlier this year that it aimed to increase sales to more than 200,000 cars this year.

The venture now has an annual production capacity of 220,000 cars, expected to grow to 300,000 units at the end of this year.

In 2005, it reported 360 million yuan (US$44.8 million) in losses due to hot price wars in the Chinese car market and high costs.

Executives with the venture said that it would regain profit this year due to robust sales growth and cost-cutting efforts.

Boutin said the joint venture will make high-end cars by 2010.

Currently, the joint venture assembles the Citroen Fukang, Elysee, Picasso, Xsara and Triomphe as well as Peugeot 307 and 206, which are small and middle-range vehicles. The Triomphe and 206 were launched earlier this year as part of PSA Peugeot Citroen's new China product lines from 2006 to 2009.

"China's car market is expanding steadily and we are very confident about our new products," Boutin said.

PSA Peugeot Citroen recently set up a wholly-owned affiliate in Beijing with an investment of 50 million yuan (US$6.2 million). It will be mainly responsible for its imported car business in China, he said.

The subsidiary Peugeot Citroen (China) Automobile Trade Co Ltd will also be in charge of exporting Chinese-made spare car parts to other countries, he said.

The French carmaker's current imported products in China include Citroen C5 and C4, and Peugeot 407, 607, 206CC and 307CC.

Last year, PSA Peugeot Citroen's imported car sales in China amounted to 1,300 units, Boutin said.

He also said that the group would start to provide loans to Chinese car buyers at the end of June.

This will be through a three-party car financing joint venture with Dongfeng Peugeot Citroen and the Bank of China one of the nation's four biggest State-owned lenders.

The French carmaker, which kicked off production in China in 1992, lags behind a lot of rivals such as General Motors, Volkswagen, Honda and Hyundai.

Last year, General Motors and Volkswagen, the current market leaders, sold 665,390 and 571,000 vehicles in China respectively.

Total vehicle demand in China is forecast to grow by around 15 per cent this year from 2005.

Last year, demand rose by 14 per cent to 5.7 million units, including 3.1 million passenger cars.

(China Daily 04/04/2006 page10)

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