PSA and Changan will form joint venture

　　Beijing News reports, Changan Auto Group and PSA Peugeot Citroen Group (PSA) announced on 6th May that they have already signed a strategic cooperation letter of intent to set up a 50-50 joint venture to manufacture light commercial vehicles and passenger cars. PSA expressed, the future products may use the new own brands of the joint venture and will share PSA’s product platform with Dongfeng Peugeot Citroen Automobile Company (Shenlong). They will produce some “unique” passenger cars to distinguish the products from DPCA.

　　PSA walks with “two legs”

　　Both sides did not disclose any specific content of the cooperation. Changan said that the current signed agreement is only an intent. The specific matters about introduction of automobile models, the time for establishment of the joint venture and so on are still under consultation.

　　Different from before joint venture uses technologies, products and brands from foreign automobile manufacturer, this cooperation may be able to adopt a new model of joint venture. Vice President of PSA and CEO of PSA China Claude Vajsman said the current planning for products is still not clear. But the Chinese authorities has proposed that the new joint venture should possess one new own brand. “Although it’s not final, we will have full communication with Changan regarding this point”.

　　The development of PSA in China has not been very satisfactory. Vajsman said, Shenlong Automobile Company, the current joint venture from PSA and Dongfeng in China, has possessed the market share of 3.5% in China. This figure is not satisfied for both Dongfeng and PSA. In order to achieve the target of market share of 5% in China, PSA is trying to find another partner in China.

　　After the restructure with Hafei and Changhe in Nov. 2009, Changan Group’s scale is expanding rapidly. The sales volume of this year’s first quarter has reached 728,000 units with over 40 billion amount of sales. Changan Group has become the second largest automaker in China

　　Sharing product platform with Shenlong

　　Viewing from the released contents of both sides, the scope of cooperation has expended from the field of light commercial vehicles to the passenger cars, which PSA signed the letter of intent with Hafei in 2007. The main PSA’s platform of passenger cars has already settled in Shenlong, which leaves not a lot of passenger car’s model to be introduced for new joint venture.

　　About this, Vajsman expressed that PSA’s traditional strengths in Europa hasn’t been brought into play in China. “Such as light commercial vehicle, MPV, SUV, crosscover vehicle and other special passenger cars, we want to introduce all of them into China”. Vajsman said, there will be great effort put into the market analysis of products in the field of passenger cars, which will not lead direct competition with the passenger cars of Shenlong. The resources allocation of two joint ventures will be distinguish from the products. The technologies of PSA, including the product platform, will be totally brought into the new company.

　　■ Attitude

　　Shenglong said they will not be affected

　　About the cooperation of PSA and Changan, Director of Public Relations’division of Shenlong Automobile Dong Anying said it is PSA’s move to achieve its annual one million target sales in China in the next few years, which will not affect it’s cooperation with Dongfeng. “It’ll increase PSA’s influence in the Chinese market to set up a new company in China, which will also boost the sales of Shenlong’s automotives”.

　　Dong Anyin expressed the product planning for the new three to five years has been basically determined. PSA’s main products of passenger cars will be manufactured in Shenlong. “To divide the products, it should be more complementary. There is not possible to face up direct competition”.

　　■ Settlement

　　First production base will be settled in Shenzhen

　　On 6th May, top management of Changan confirmed the production base of the new joint venture will be located in Shenzhen, which is Hafei’s Shenzhen base. Vajsman said, the final determination of the production base will depend on the confirmation of product planning. Except for Shenzhen base, it will be decided after signing the formal agreement whether other bases will be put into use.

　　Shenzhen base is constructed in 2004. The input of down payment is 2 billion Yuan. According to the Hafei’s original plan, the annual output after down payment is 30.000-50.000 units in Shenzhen base. Then it should be proceed for the increase of 80,000 and 100,000 units, and this year will be grown to an annual output of 200,000 units. But because of the poor performance of the sales of Saibao, Shanzhen base has been fully out of business since June 2007.

　　■ Review

　　Negotiator changed three times in three years

　　The path for PSA to find out the second Chinese partner has gone through three years.

　　In 2007, PSA and Hafei signed a memorandum of understanding to set up 50-50 joint venture, which would produce and sale light commercial vehicles under ten seats in China.

　　After the New AVIC Auto Group was established in 2008, the negotiator of PSA was changed to the parent company of Hafei – New AVIC Auto Group.

　　In 2009, Changan Group restructured with New AVIC Auto that Hafei was incorporated to Changan. Therefore, the negotiator was turned to Changan.

　　See original Chinese report Please click:

　　http://auto.sohu.com/20100507/n271966992.shtml

　　(Jianfei Keke)