PSA Peugeot Citroen on Tuesday said it would spend €600 million ($US760 million) to double capacity at its main China plant by the second half of 2006, banking on further growth in the country’s market, Reuters reported.
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Citing a PSA statement, the report said the investment will enable the company’s car-making joint venture with Dongfeng Motor – Dongfeng Peugeot Citroen Automotive (DPCA) – to build up to 300,000 cars a year in the central city of Wuhan.
“We need this capacity,” Peugeot chairman Jean-Martin Folz reportedly said at a press briefing, adding he did not believe the China car boom was fizzling out and that he was confident their venture would enjoy double-digit growth over the next few years.
“I’m not only satisfied, but confident,” Folz told Reuters.
The cost of the expansion would be funded by the joint venture, the company said in a statement cited by the news agency.
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By GlobalDataMiao Wei, chairman of local partner Dongfeng, reportedly told a media briefing in Beijing that annual sales are expected to triple to 30 billion yuan ($US3.6 billion) by 2007. Sales in 2003 had exceeded 100,000 units, Miao reportedly added, bringing in revenue of 10 billion yuan ($1.2 billion).
Sales should jump 40% to 140,000 units this year, the company said, according to Reuters.
According to the report, Miao also said Dongfeng would soon finalise discussions about a truck joint venture in China with Renault.
“Talks are proceeding very well, and there should be some news soon,” he reportedly said.
Reuters noted that Renault owns 44.4% of Nissan Motor, which already has a $2 billion joint plant with Dongfeng in China.
Miao also reportedly said Dongfeng was close to selling its trucks internationally through Nissan’s global sales network, though the deal would not be reciprocated for Nissan’s trucks in China.
Nonetheless, Reuters added, shares in Nissan’s truck-making subsidiary, Nissan Diesel, rose 13% after the business newspaper Nihon Keizai Shimbun reported the deal would enable the company to sell its trucks in China.
Reuters said PSA has lagged behind firms such as Volkswagen and General Motors in tapping the potentially huge Chinese market but will launch the Peugeot 206, one of Europe’s top-selling cars, there from early 2005, broadening its product mix in an increasingly competitive market, while aiming to launch one new model a year in the country.
The news agency noted that PSA and Dongfeng said in late 2002 they would invest $120 million to boost production and bring the Peugeot brand back to China after a failed foray that prompted it to pull out in 1997.
Dongfeng, China’s third-largest car maker, also builds engines for Honda’s Accord plant in Guangzhou, Reuters noted.
