PSA Peugeot Citroen could raise production at its Chinese plant at Wuhan to 200,000 cars a year with the introduction of a third shift, and with sales booming in the PRC it could happen sooner rather than later. Chris Wright reports.
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The Dongfeng Citroen factory became a PSA joint venture in December last year with the Peugeot 307 set to join the Citroen Elysee sedan – a development of the successful ZX Fukang – the Picasso MPV and the Xsara sedan on the production line. Citroen sales hit 85,100 in 2002, up 33,000 in a market which jumped from 717,600 in 2001 to 1.1 million last year. In the first quarter of 2003 vehicle sales in the country are already running 101 percent ahead of the same period last year.
Production capacity at Wuhan is currently 150,000 and the introduction of the Xsara this year plus the Peugeot 307 is expected to bring the plant close to full stretch. Pressure could also build to produce a small car for the Chinese market in which case Citroen’s director of international affairs Michel Bricout admitted further investment would be required.
“We can handle two platforms but any increase would mean putting more money into our Chinese operations,” he said. He would not say whether this would be invested in a line for the C3 or a further development of PSA’s small car platform being jointly developed with Toyota and to be built in the Czech Republic.
“We have to wait and see how the market in China develops,” he added. “Contrary to popular opinion there is not a huge demand for small cars in China at the moment. The population which can afford to buy new cars want modern mid range sedans such as the Elysee. The Xsara we intend to sell as a highly specified, upmarket 2-litre car.”
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By GlobalDataCitroen also exports the C5 executive car to China and at this week’s Shanghai Auto Show is launching the C3 and Pluriel small cars plus the C8 large MPV as imports. Because the Chinese market is geared to traditional sedans, many of which are sold to government bodies or businesses, Picasso sales have so far been slow and largely centred around the cities of Beijing, Shanghai and Canton.
“The market is very polarised,” said Citroen chief executive Claude Satinet. “In the big cities the car market is already becoming quite sophisticated but there are still vast areas of the country where sales remain very low. In a country of 1.2 billion people sales of just over one million vehicles are still very small so it is really pointless to talk about the cost of buying or owning a car for the average person. There is a significant proportion of people who can afford to buy cars and these tend to be modern, mid-sized sedans rather than small, cheap cars. This will change over the years and we will adjust our strategy accordingly.”
Although the PSA group is a market leader in diesels there is no infrastructure for diesel passenger cars in China, nor is there a willingness by the Chinese government to introduce one. The government is already looking at the introduction of a natural gas taxi fleet by 2008 and this is a situation PSA is monitoring.
“We have to look at what is happening in the market, but we have no plans for natural gas vehicles at the moment,” said Satinet.
Citroen currently has 450 sales and service outlets in China and is looking to bring every one of them up to the same standards as those in Europe. Already 45 have passed Citroen’s Gold Dragon Charter, a quality certification bringing them up to world-class standards. The plan is to have 110 signed up by the end of this year.
Satinet said: “Like the vehicles we sell in China we want our dealers to be Citroen currently has 450 sales and service outlets in China and is looking to bring every one of them up to the same standards as those in Europe. Already 45 have passed Citroen’s Gold Dragon Charter, a quality certification bringing them up to world-class standards. The plan is to have 110 signed up by the end of this year.
Satinet said: “Like the vehicles we sell in China we want our dealers to be first class, Consumers in China do not want old ideas or out of date technology, the want the best and most modern available.”
The Golden Dragon Charter is a quality standard similar to that observed by Citroen dealerships worldwide. “We have been raising the image of our dealerships in China because consumers have the same demands and tastes as those in Europe,” added Satinet.
The automaker’s 450 outlets are based in 250 cities and towns in China with clusters around the main cities of Beijing and Shanghai. Only one of these is wholly owned by the PSA Dongfeng joint venture and that is close to the plant in Wuhan. Entrepreneurs own the rest.
Satinet predicted a new car sales market of 1.5 million in China in 2003 although he admitted it was more difficult to predict beyond that. “We are looking to preserve out market share of between 7 and 8 percent which is good business if China continues the growth rate of 15 percent a year it has achieved over the past 10 years.”
Dongfeng Citroen Automobile Company was set up in 1992 and also produces engines and gearboxes in Xiang Fan. More than 350,000 Citroen vehicles have been produced in China. In December 2002, the co-operation between Dongfeng and PSA was further extended with the founding of the new joint venture, Dongfeng Peugeot Citroen Automobiles as a precursor to the launch of Peugeot production in the country.
