PSA Peugeot Citroen CEO Jean-Martin Folz and Dong Feng Motors president Miao Wei have signed a new joint agreement that will expand cooperation between the two groups and see Citroen, which has 7.7% of the Chinese market, joined by Peugeot.

This second major stage in the cooperative agreement between Citroën and Dong Feng Motors since 1992 now concerns the PSA Peugeot Citroën Group, and will allow a substantial increase in the production and sale of Citroën and Peugeot vehicles in China.

Known as Dong Feng Peugeot Citroën Automobiles (DPCA), the new company will comprise an engineering and production division and two marketing divisions for the Peugeot and Citroën brands.

The joint venture will market the two brands through separate dealer networks.

Citroën currently has 470 sales and after-sales points. Its market share was 7.7% at the end of September and it sells the Fukang hatchback and notchback (based on the old ZX), Xsara Picasso minivan and Elysée.

Peugeot plans to create a dealer network that in 2004 will begin marketing the first of its model to be built in China. Based on the 307 platform, the new model will be specifically designed for the Chinese market.

The company's ambitious product plan calls for the introduction of new Citroën and Peugeot cars every year.

In 2004, when the Wuhan plant is building six models, the sales target will be 150,000 vehicles, eventually rising to 300,000.

The Wuhan plant will initially be operating with PSA Peugeot Citroën's new platform 2, with another group platform for smaller cars scheduled for introduction in the next few years.

To finance investments in this second phase of cooperation, the two partners have decided to increase the joint venture's capital by CNY 1 billion. PSA Peugeot Citroën will contribute CNY 625 million and Dong Feng Motors, CNY 375 million.

Following this transaction, each partner will hold 32% of the capital alongside Chinese and French banks. Under the terms of the agreement, at the end of 2003, PSA Peugeot Citroën and Dong Feng Motors will remain the sole shareholders, each with a 50% interest.