Peugeot Citroen, FranceÔÇÖs largest carmaker, and ChinaÔÇÖs Changan Automotive Group Co. have signed an agreement to set up a joint venture in China, it has been announced.
The deal aims to tap rising demand for vehicles in China, the worldÔÇÖs biggest auto market, with the venture set to make environmentally friendly light commercial vehicles and passenger vehicles.
Changan is aiming to sell more than 2.6 million vehicles by 2012. SAIC Motor Corp., ChinaÔÇÖs biggest domestic automaker, sold 2.71 million vehicles last year.
Changan is part of Chongqing Changan Automobile Co, which also runs a three-way tie up with car makers Ford and Mazda Motor.
Last year, China surpassed the US in vehicle sales for the first time, prompting a flurry of expansion by foreign carmakers in the Asian country.
Analysts have predicted that the Chinese market could grow by 20 per cent this year.
Paris-based Peugeot already has a Chinese partnership with Dongfeng Motor Group Co.; and GermanyÔÇÖs Volkswagen said recently that it plans to increase its Ôé¼4 billion investment programme in China by Ôé¼1.6 billion.
PeugeotÔÇÖs new partnership with Changan wonÔÇÖt compete directly with its Dongfeng venture, which assembles models including the 308, 408 and Citroen C5. The French company is currently planning a third factory with Dongfeng as their two plants in Wuhan, eastern China, are nearing capacity.
Last year Peugeot Citroen produced 270,000 cars in China for a market share of just over three per cent. This year, production is likely to top 350,000 vehicles.
However, PeugeotÔÇÖs operations in China are still dwarfed by the market leaders US-based General Motors and Volkswagen, which claim 16 per cent and 12 per cent of the countryÔÇÖs auto sales respectively.
GM already makes cars and light commercial vehicles with China's SAIC Motor Corp and FAW Group; and it is now selecting a site for a greenfield China plant.
Yesterday, Peugeot Citroen said it plans to repay Ôé¼1 billion this year of the Ôé¼3 billion loan that the company received in 2009 from the French government to help it through the economic downturn.
The loan terms oblige the company to work on developing low-emission vehicles, among other things.
