Peugeot Sees China Passenger-Car Sales Growth

[Plex]

BEIJING—The torrid growth in China's auto market is likely to level off soon, but Xavier Peugeot, global director of marketing and communications for French auto brand Peugeot, said sales in China's passenger-car market could still double over the next decade to well more than 20 million cars a year.

"China's car market sold about 400,000 vehicles in 2001, and the size of the market is now about 11 million cars a year," Mr. Peugeot told a small group of journalists Thursday in Beijing. "It's going to double over the next decade. It's impressive." Peugeot is a unit of PSA Peugeot Citroen SA.

Peugeot officials agreed sales growth in China is likely to continue unabated. But Timothy Zimmerman, a senior Peugeot executive based in Beijing, noted the growth rate is likely to decelerate to a "more sustainable" pace.

"There's still a huge opportunity in terms of sales volume," he said. "But I don't think we will continue to see the 40% to 50% growth per year we saw over the last two years. It will be more of a sustainable 15% growth a year." China's overall automobile sales, including passenger cars and commercial vehicles such as trucks and buses, grew about 50% last year and displaced the U.S. as the world's biggest auto market. The market is poised to grow about 30% this year, according to industry projections.

Last week Kevin Wale, head of General Motors Co.'s China operations, said sales in China's domestic auto market could reach more than 17 million vehicles this year and 19 million next year, up from 13.7 million in 2009. GM's sales forecast points to continued growth, but it also means high-pitched growth in the Chinese auto industry is going to continue to slow this year and then slow down even more next year.

Analysts say that is partly because some of the stimulus policies that have boosted auto sales expire at the end of this year, and also due to a possible increase in China's vehicle ownership taxes that might take effect next year, which they said would likely damp sales.

Messrs. Peugeot and Zimmerman didn't elaborate on Peugeot's sales outlook other than to say the French brand is likely to see continued growth in China. PSA Peugeot Citroen, in a joint venture with a local Chinese partner, manufactures and markets Peugeot and Citroen brand cars in China.

Peugeot is a small brand with a limited presence in China that, according to consulting firm J.D. Power & Associates, doesn't even rank in China's top 20 auto brands by sales volume. The company said the brand sold a total of 112,000 cars in China last year and is aiming to sell 150,000 cars this year. According to J.D. Power's most recent data, Citroen has a slightly better presence in China; it is China's No. 18 auto brand by sales volume.

Mr. Zimmerman said Chinese consumers' inexperience with global brands and cars gives Peugeot a rare chance to boost the brand's global presence.

"Some 80% of the people who buy our cars here are buying their first cars, and that compares to 30% or so in Europe," he says, pointing to a relative absence of bias over brands among Chinese consumers.

Asked if that makes him hopeful for competing more head-on with Peugeot's bigger global rivals in China such as Germany's Volkswagen AG, Mr. Peugeot said, "We don't fear anybody. Otherwise we wouldn't be here."

Still, Mr. Peugeot noted: "We have to better explain what a French brand can bring to the Chinese market. We need to be able to say this is the reason why we are here. We need to make sure that we can explain clearly to the Chinese consumer who Peugeot really is."

Online.WSJ