French auto maker PSA Peugeot Citroen and its Chinese partner
Dongfeng Automobile Co. are considering building another assembly
plant in China to meet fast-expanding demand for its vehicles.
Loss-making Peugeot said Friday that wants to grow outside its
saturated core market in Europe, but lacks the financial strength
to be able to invest the huge amounts that would be required to
expand production and sales in China as well as in new markets in
Asia, and is looking to deepen its 20-year partnership with
Dongfeng.
Peugeot and Dongfeng are involved in discussions that could lead
to Dongfeng taking substantial minority stake in the French company
through a capital increase. The French government could also take a
stake in Peugeot to balance Dongfeng's interest, according to
people familiar with the discussions.
Peugeot and Dongfeng's existing joint venture DPCA already has
three assembly plants in China at Wuhan, which produce the Peugeot
207, 307, 308, 408, 508 and 3008 models, as well as the C2,
C-Elysee, C-Triomph, C4, C5 and C4L for the Citroen brand.
Peugeot also has a recently opened fourth production facility at
Shenzen with another Chinese partner Chongqing Changan Automobile
Co.
A spokeswoman for Peugeot said a decision where to locate the
new factory of the Peugeot-Dongfeng will be taken this year, but
said it could be at Chengdu, in the western part of China, rather
than at Wuhan, where DPCA's three others plants are located.
DPCA is rapidly running out of capacity to cater to the steep
rise in demand for automobiles in China. It produced 550,000
vehicles in 2013, and is targeting 650,000 this year. Annual
capacity of the three existing plants will be raised to 750,000 by
2015, the spokeswoman said.
Write to David Pearson at david.pearson@wsj.com
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