PSA Finds a New Partner in China

The French automaker PSA Peugeot Citroen (PSA) opened a new door for its development in China.

After 6 years of thorny and difficult search, PSA finally found a new partner in China. According to a source knowing PSA well, the French car maker is close to the settlement of the agreement with China-based Changan Auto. The final agreement will be signed in May.

The details of the agreement remain unknown, but according to the previous reports by the media, Changan Automobile and PSA will make the Shenzhen-based plant of Hafei Atuo, another Chinese domestic car maker, their manufacturing base to introduce the small cars and commercial vehicles with the brands of Peugeot and Citroen.

The negotiation between PSA and Changan Auto was started in November 2009. Before that PSA was negotiating about the cooperation with several Chinese car makers like Dongfeng Auto, Hafei Auto and so on for several times, but no satisfactory results were obtained. In November 2009, Changan Auto acquired the auto manufacturing sector of Aviation Industry Corporation of China, with which PSA was talking on the cooperation. Therefore, PSA began to talk with Changan Auto from then on.

“Changan Auto acted very actively in the negotiation,” said the aforementioned source. It only took four months for the two parties to reach an agreement. In his opinion, Changan Auto scurried to reach the agreement for it wanted to solve the problem of the idle production capacity of the Hafei Auto’s manufacturing base in Shenzhen.

The negotiation team of PSA mainly consisted of the French workers of PSA (China). The team leader was Mr. Pedro, head of planning department of PSA (China). According to the source, PSA saw a lower position in the global market in these years as well as a poor performance in China; therefore Changan Auto put forward rigorous conditions about the joint venture, including the transferal of some core technologies.

In 2009, PSA sold 3.2 million units in the world, down 2.2% compared with 2008. The company suffered a net loss of 1.161 billion euros, which was the biggest for the company in the recent 20 years.

The insider from Changan Auto affirmed the negotiation about jointventure with PSA and he was satisfied with the progress. “Both parties are content with the results having been gained. We will promote the final settlement of this matter.”

Previously, PSA had an 18 years’ cooperation with Dongfeng Auto, but they failed to build up a close relationship with each other during this period.

In 2009, Dongfeng Peugeot Citroen Automobile Company Ltd, a joint venture company between PSA and Dongfeng Auto sold 270 million vehicles in China, accounting for 3.6% of the market. However, PSA’s goal is to acquire 7% to 8% of the market share in China. Moreover, the joint venture company suffered straight years’ loss and only got rid of it in 2006.

The analysts pointed out that Philippe Varin, who became the president of PSA on June 1, 2009, visited China for several times after he took his post. He had several talks with the top management of Dongfeng Auto but no joint statement about the future development or something like that was available. “This is quite rare in the auto industry, which also told the loose relationship between PSA and Dongfeng Auto.”

The insider from PSA also said that they had no close relationship with Dongfeng Auto. He hoped that PSA can achieve better performance in China with the help of the new partner.