Manufacturing News

Chang'an in talks to become Peugeot's second partner

PSA Peugeot-Citroen is in talks with Chang'an Motor Corp, China's fourth-largest automaker, to form the French car company's second joint venture in China.

Chang'an now has two joint ventures - one with Suzuki and three-way deal with Ford and Mazda - and is reportedly now in final negotiations with France's top auto group.

The deal is expected to close soon after the upcoming Spring Festival, recent media reports said.

Chang'an Motor Corp has set a clear timetable for both sides to sign the contract but has not revealed details, Nanfang Daily reported.

PSA Peugeot-Citroen already has a partnership with Dongfeng Motor Corp, the third-biggest auto group in China.

Other foreign auto giants, including Volkswagen, General Motors, Toyota and Honda, each already have two joint ventures in the world's largest car market.

The top carmaker in France has been seeking a second partner in China since 2004.

When its previous potential partner Hafei, a micro van maker in northeast China, was taken over by Chang'an Motor Corp last year, the company switched over to negotiate with parent company Chang'an.

Media reports said that the new tie-up will probably be located in the southern city of Shenzhen, where Hafei has an existing plant.

Hafei opened the Shenzhen plant in 2004 with a designed annual capacity of 100,000 units. Two years later the facility started to build sedans but the products didn't sell well. Hafei shuttered the factory in June 2007 and the site has not resumed production.

PSA Peugeot-Citroen's joint venture with Dongfeng Motor Corp was established in 1992 in the central city of Wuhan, but the partnership has underperformed.

The automaker moved an all-time record high of 272,000 vehicles last year, a 52 percent annual increase, as it rode the record-setting market boom. Yet the French brands still trail far behind their counterparts.

US carmaker General Motors sold a total of 1.83 million vehicles last year. German auto giant Volkswagen had total sales of 1.4 million units. Sales by Japan's Toyota Motor reached 709,000 units.

A second tie-up could provide an opportunity for PSA Peugeot-Citroen to hit the accelerator in its localization process and greatly raise its sales volume in China, which became its second-largest market worldwide last year following only France.

The carmaker aims to raise its market share in China to 8 percent by 2016 from the current 3.6 percent.

Chang'an Motor Corp could benefit from the deal as well.

Last year, Chang'an Motor Corp acquired minivan makers Hafei and Changhe from Aviation Industry Corp of China and narrowed its production and sales gap with No 3 auto group Dongfeng Motor Corp. Its 2009 sales trailed Dongfeng by just 30,000 units.

As well, Chang'an's top-selling models are micro vans, which have a lower profit margin than sedans or SUVs.

If its project with PSA Peugeot-Citroen comes to fruition, possible models produced by Chang'an include the Peugeot 107 and 607 and the Citroen C1 and C6, as well as some SUVs, since the venture between Dongfeng and PSA Peugeot-Citroen already builds the 207, 307 and 408 as well as the C2, C4 and C5.

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