Peugeot opens third plant in China

PUBLISHED : Wednesday, 03 July, 2013, 12:00am
UPDATED : Wednesday, 03 July, 2013, 4:48am

PSA Peugeot Citroen, the unprofitable French carmaker, opened a third assembly plant in China, expanding in the world's largest vehicle market even as a slump in European demand prompts it to cut jobs at home.

Chief executive Philippe Varin, who flew in for the opening ceremony in Wuhan, Hubei province, said the plant would help the firm capture 5 per cent of the mainland market by 2015.

The Citroen C-Elysee and Peugeot 301 would be among four models produced at the factory - opened with Wuhan-based Dongfeng Motor - which would increase Peugeot's annual capacity by two-thirds to 750,000 units by the end of 2015, it said.

The Paris-based carmaker, which produced 40 per cent of its vehicles in France last year, reported a €576 million (HK$5.8 billion) operating loss for the period and has started implementing a restructuring plan that includes closing a factory on the outskirts of the capital and eliminating 11,200 positions in the country.

"China is probably the only way for PSA to get out of their difficulties in Europe," said Klaus Paur, the global head of automotive at industry researcher Ipsos in Shanghai. Peugeot's reliance on Europe had "amplified" its problems, he said.

European car sales fell to a 20-year low in May as record joblessness caused by a recession in the euro zone reduced demand at Peugeot, Renault, Fiat and General Motors. Political leaders are seeking ways to revive the shrinking economy, with unemployment in the region reaching a record 12.2 per cent in April.

Dongfeng Peugeot Citroen's sales in China surged 33 per cent to 276,896 units in the first half of the year, and the joint venture planned to introduce 11 models in the country until 2015, general manager Qiu Xiandong said yesterday. That would put it on course to outpace China's passenger vehicle market, which has risen 15 per cent in the first five months of this year.

Peugeot raised its sales target in China this year to 557,000 units from 500,000 units, Gregoire Olivier, the chief executive of Asian operations, said in April. China might overtake France as its biggest market by 2015, he said in February.

Jean Mouro, the deputy general manager at Dongfeng Peugeot Citroen, said the company planned to introduce at least one model for each of its brands annually until 2015. It also planned to raise its dealerships in China to 1,200 by 2015 from 878 at the end of this year, he said.

Peugeot will produce cars for its premium DS line in Shenzhen with Changan Automobile.

By making cars on the mainland, the firm avoids tariffs that add at least 25 per cent to costs of imported cars.