Gruelling competition and overcapacity in the mainland car market have hit performance at Peugeot Citroen's remaining joint venture in China, which yesterday announced a loss of 540 million yuan for last year. Li Pingan, a spokesman for Wuhan-based Dongfeng Peugeot Citroen Automobiles, said that sales fell 14 per cent last year to 89,000 vehicles, down from 104,000 in 2003. Its initial target for the year had been 124,000. Dongfeng is the second key foreign-invested car venture, after Volkswagen's joint venture with Shanghai Auto Industry, to announce a drop in sales. The country's vehicle output last year rose 14 per cent from 2003 to five million units, with passenger car production increasing 12 per cent to 2.3 million. Mr Li blamed Dongfeng's losses on price wars among manufacturers, new restrictions on car loans and the sharp rise in the euro against the US dollar. The company buys a portion of its car parts from France, paying in euros, while its revenue is in yuan, which is pegged to the greenback. In 2003, it posted a profit of 400 million yuan. Mr Li said the company was working hard to raise the percentage of local components in its models and forecast another difficult year, with a sales target of about 115,000. In November last year, Dongfeng cut prices of its Peugeot 307 series models in the mainland market by 20,000 yuan, saying it would offer rebates of the same amount to customers who had bought the model after June. Peugeot Citroen has had a difficult history in China. It abandoned its first joint venture, with Guangzhou Automotive in Guangdong, in 1997 after several years of losses and missed production targets. The French carmaker set up its second venture in May 1992, with China Dongfeng Auto, with a design capacity of 300,000 passenger cars and 400,000 engines. It produces Fukang, Elysee, Picasso and Xsara cars at two plants in Wuhan and Xiangfan, in Hubei province. Dongfeng has seen its market share eaten by foreign-invested joint ventures set up since then, including those of General Motors Corp, Ford Motor, Honda Motor, Hyundai Motor, Toyota Motor and Nissan Motor. Dongfeng also has a joint venture with Nissan. The State Statistical Bureau has forecast passenger car sales will reach 2.48 million this year, up 8 per cent, and 2.73 million in 2006, up 10 per cent, with a capacity utilisation rate of just 52.5 per cent. Banks have become more demanding when extending car loans following widespread non-repayment and many potential customers are waiting for more price falls before buying. Mr Li put a brave face on the disappointing results. 'There is enormous potential in the market,' he said. 'Through competition, some companies will drop out. Because of our technology, our new models and the strength of our mother company, we will survive.'