Peugeot and China's Changan sign joint venture deal

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SHANGHAI — France's PSA Peugeot Citroen and China's Changan Automotive Group said Thursday they had signed an initial agreement to set up a joint venture to produce vehicles in the world's top auto market.

Peugeot and Changan have signed a letter of intent for the 50-50 venture to make light commercial vehicles and passenger cars, the companies said in a joint statement.

"This joint entity will produce light utility vehicles and passenger vehicles that will conform to the best environmental standards," the companies said.

"The new joint venture will be complementary to the companies' existing joint ventures."

The automakers are still discussing details of the project, according to the statement.

Peugeot already has a joint venture with China's Dongfeng Motor Group but intends to further increase its presence in the country.

It announced in January that it aimed to increase sales in China by 30 percent this year, double the growth rate for the country's entire market.

China has been a boon for foreign automakers as sales in developed countries slumped during the financial crisis.

The nation's auto sales hit 13.64 million units in 2009, overtaking the United States as the world's number one auto market as Beijing offered incentives such as lower purchase taxes and subsidies for fuel-efficient vehicles in rural areas to boost the sector.

Vehicle sales in China jumped 55.8 percent year-on-year in March to 1.74 million units, setting a new monthly record.

Europe's biggest automaker, Volkswagen, said last month it would increase its investment in China by 1.6 billion euros (2.1 billion dollars) over the next two years, building two new production sites.

AP

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Peugeot committed to building 3rd China plant -exec

SHANGHAI, May 7 (Reuters) - French carmaker PSA Peugeot (PEUP.PA) remains committed to building a third China plant as it speeds up expansion in the world's largest auto market, a company executive said on Friday.

PSA Peugeot, which already operates two facilities in China with partner Dongfeng Motor Group Co (0489.HK), aims to sell up to 400,000 cars in the country this year, approaching its annual capacity of 450,000 units, the executive told Reuters.

The automaker has set a target to sell 2 million vehicles annually by 2020, raising the company's market share in China to 10 percent from the current 3.5 percent, he said.

"PSA and Dongfeng are both committed to our third China plant. We are still discussing the details of the new facility with our partner," said the executive, who asked not to be named as he was not authorised to talk to the media.

The joint venture sold 120,300 cars in the first four months of this year, up 63 percent from a year earlier, he said.

China, which eclipsed the United States as the world's largest auto market last year, has been a major bright spot for an industry hit by a sharp global downturn.

Many foreign automakers, including Volkswagen AG (VOWG.DE) and Ford Motor (F.N), are stepping up their presence in the country.

Earlier in the week, PSA Peugeot reached an initial agreement to set up a separate 50-50 vehicle manufacturing venture with China Changan Automotive Group, the parent of Chongqing Changan Automobile Co (000625.SZ).

Financial details of the venture, which will make light commercial vehicles and passenger cars, have yet to be decided.

One option would be to use Changan Group subsidiary Harbin Hafei Automobile Industry Group's existing facility in the southern boomtown of Shenzhen.

"Nothing has been decided yet. We are leaving our options open," the Peugeot executive said on Friday

Reuters