Peugeot-Citroen mulls JV with Chang'an Auto

By Li Fangfang (China Daily)
Updated: 2010-05-07 09:01
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Letter of intent signed to produce cars, light-commercial vehicles

BEIJING - French carmaker PSA Peugeot Citroen and China's fourth largest automaker Chang'an Automobile Group said on Thursday that they had signed a letter of intent for the creation of a 50-50 joint venture in China.

Peugeot-Citroen mulls JV with Chang'an Auto

A Peugeot-Citroen employee assembles the dashboard of a vehicle at the company’s factory in Poissy near Paris. The new venture will help fuel Peugeot-Citroen’s ambition of selling 2 million vehicles in China annually. [ANTOINE ANTONIOL / BLOOMBERG NEWS]

According to the deal signed on May 4 in Chongqing, the "possible" joint venture will produce environmentally friendly light commercial vehicles and passenger cars, Alexis Vannier, communications director for Peugeot-Citroen, told China Daily on Thursday.

The new facility will complement both parties' existing ventures in China, without direct competition, he added, however, refusing to provide more information, saying both parties are still discussing the details.

Chang'an currently has a three-way tie up with Ford and Mazda Motor Corp, which aims to sell more than 2.6 million vehicles annually by 2012.

Peugeot-Citroen also has a joint venture with Dongfeng Automobile Co Ltd, China's third largest automaker.

The new venture will help fuel Peugeot-Citroen's ambition of selling 2 million vehicles in China annually while grabbing 10 percent of the market by 2020, Peugeot's China CEO, Claude Vajsman said on Thursday.

The company currently controls around 3.5 percent of China's passenger car market.

"To achieve the target, we will further strengthen our existing partnership with Dongfeng, by breaking ground on our third plant in the near future and launching at least one new model under the two brands of Peugeot and Citroen respectively every year," said Vajsman.

The joint venture with Dongfeng sold 120,300 cars in the first four months of 2010, up 63 percent over last year, and is expected to break the 400,000-unit barrier this year.

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According to Vajsman, expanding its business in China with a new partner and launching a new line of light commercial vehicles are also part of his company's strategy to take market share from international rivals like General Motors and Volkswagen.

"It will also be a big step for Chang'an to improve its competitiveness among China's top automakers as it is quickly strengthening its position through a series of acquisitions and restructuring in the last few years," said Jia Xinguang, an independent auto analyst.

However, Zhong Shi, another independent auto analyst based in Beijing, said he was concerned about how Peugeot-Citroen would balance its partnerships with both Dongfeng and Chang'an.

Hui Yumei, an auto analyst with industry research company Sinotrust, said "choosing the right product for the new venture to produce locally will be the key to success for Peugeot."