PSA eyes new start in Chengdu

Turn­around is part of a bailout by Dongfeng two years ago

China Daily (USA) - - BUSINESS - By BLOOMBERG

PSAGroup, caught in a China sales slump de­spite an ex­pand­ing mar­ket, will in­au­gu­rate a sev­enth fac­tory inthe world’s big­gest car mar­ket this week, fo­cused on pro­duc­ing sport util­ity and mul­tipur­pose ve­hi­cles for its Peu­geot and Citroen brands.

The plant in Chengdu in south­west­ern China will have an an­nual ca­pac­ity to man­u­fac­ture 300,000 Citroen and Peu­geot ve­hi­cles, as well as the lo­cal Feng­shen name­plate, as part of its joint ven­ture with share­holder Dongfeng Mo­tor Co. Pro­duc­tion will start at the end of the year.

PSA’s joint ven­ture sales in China dropped more than 19 per­cent in the first half to 297,000 units de­spite a tax cut boost­ing over­all in­dus­try de­mand. The com­pany is now plan­ning to in­tro­duce 18 new mod­els by 2020 in the coun­try — in­clud­ing five SUVs by 2018 — to plug a gap in its lineup of mainly sedans at a time when in­creas­ingly af­flu­ent Chi­nese con­sumers are fa­vor­ing larger ve­hi­cles.

It has also re­placed the ex­ec­u­tives lead­ing the Asia re­gion and DPCA joint ven­ture and is fo­cus­ing on keep­ing pro­duc­tion costs in check.

Chief ex­ec­u­tive of­fi­cer Car­los Tavares needs to jump­start growth in China in or­der to com­plete the turn­around that be­gun with Dongfeng’s bailout of PSA two years ago. As part of a plan called “Blue Up­per”, the com­pany aims to sell 1 mil­lion cars in China by 2021 while low­er­ing pro­duc­tion costs by 20 per­cent from 2015 lev­els. Last year, 63 per­cent of PSA’s ve­hi­cles were sold in Europe, ver­sus 25 per­cent in China.

“The main fac­tor im­pact­ing their sales is the lack of new mod­els, the sec­ond one is a mis­match be­tween what is in de­mand and what the com­pany is of­fer­ing” in China, said Ben­jamin Caven­der, a Shang­hai-based an­a­lyst at China Mar­ket Re­search Group.

“The new mod­els are go­ing to help them right away, but it’s also a multi-year process of sup­port­ing the brands and in­vest­ing in their pres­ence here.”

The Chengdu fac­tory will boost DPCA’s to­tal ca­pac­ity from 750,000 units a year. The part­ners al­ready op­er­ate three plants in­Wuhan, in cen­tral China’sHubei prov­ince.

BLOOMBERG

Work­ers on the pro­duc­tion line of a plant op­er­ated by Dongfeng Peu­geot-Citroen Au­to­mo­bile Ltd in Wuhan, Hubei prov­ince.

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