Business / Auto China

Dongfeng's capital injection to give Peugeot new drive

By Li Fangfang in Beijing and Li Xiang in Paris (China Daily) Updated: 2014-02-20 07:38

"China will be the No 1 market for us in 2015," said Varin.

He noted that there is the possibility of building a fourth production plant in China to achieve the company's goals in the world's largest and fastest-growing auto market.

He added that Peugeot will establish an export joint venture with Dongfeng for the sale of its own brands (Peugeot and Citroen) and joint venture brands produced with Dongfeng in key markets in Southeast Asia.

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A joint research and development center in China for products and key technologies dedicated to fast-growing markets will be established by Peugeot and Dongfeng.

Peugeot's market share in China stood at 3.6 percent in 2013, according to the company's 2013 annual results.

"We will continue to increase our market share in China through the extension of our product range and the launch of new products," said Jean-Baptiste de Chatillon, chief financial officer of Peugeot, at the news briefing.

The company will launch its new models - the DS5 LS and DS CUV - in China in 2014.

Analysts said that the alliance will give the French automaker access to cash and the Chinese automaker a path to become an international player.

"PSA and Dongfeng both stand to gain from the deal, with a strategic emphasis on raising sales in emerging markets, while using their production bases in China to offer competitively priced models," said Namrita Chow, a senior analyst with the United States-based consulting firm IHS Automotive.

"For PSA, the benefits of the deal and access to funds are quite straightforward. The automaker will avoid bankruptcy in 2015 following the new capital injection, while the deal with Spanish bank Santander will keep it afloat after its state guarantee expires next year," said Chow.

"The alliance will not only help PSA extend its presence in markets beyond Europe but it will also give Dongfeng greater access to international markets," she added.

"Stagnant and declining markets in Western countries not only helped China overtake the US as the world's largest vehicle market, they also supported improvements in Chinese automakers' capabilities and revenue," said Zhong Shi, an independent auto analyst in Beijing.

"We can see in recent years that more Chinese automakers are capable of competing with foreign rivals in global markets."

Zhong said these trends will also help the Chinese automotive industry in terms of products.

"Local production will no longer mean the simple transfer of existing models to Chinese plants. New models will be jointly developed by foreign and Chinese auto manufacturers," said Zhong.

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