PSA Forms Partnership with Chang’an

　　After the Beijing International Automotive Exhibition, people thought that automotive news may slide into the off-season. However, two significant things happened one after another which people had not expected. Guangzhou Automobile Group took over Gonow Auto. Then PSA Peugeot Citroen established a cooperative relationship with Chang'an Automobile. On May 4, PSA and Chang'an formally signed a joint venture agreement. Each side will hold 50% stake and the joint venture which is located in Shenzhen will produce commercial vehicles. The plant was once Hafei's base in Shenzhen.

　　Guangzhou Automobile intended to expand its business via acquisition. The agreement between PSA Peugeot Citroen Group and Chang’an Automobile shows that French automakers are eager to speed up their pace in Chinese market.

　　The PSA Peugeot Citroen will cooperate with two Chinese automakers. Dongfeng Peugeot Citroen Automobile, the joint venture founded by PSA and Dongfeng Motor, has been developing for almost 20 years. In the future, we will embrace a new joint venture-Chang'an Peugeot (tentative name).

　　So why did PSA Peugeot Citroen found relationships with two Chinese auto giants? In China's auto market, PSA Peugeot Citroen has not been performing well. Actually PSA Peugeot Citroen has been developing its business in China for a large number of years. On March 15, 1985, Guangzhou Automobile, China Trust and Investment Corporation, Peugeot, International Finance Bank and BNP jointly signed an agreement to establish Guangzhou Peugeot Automobile Company. Now in China there is Dongfeng Peugeot. However, as to both Guangzhou Peugeot and Donfeng Peugeot, the sales are not satisfactory. In 2009, the sales of Dongfeng Peugeot Citroen Automobile only totaled 272,000 units. Therefore at present the joint venture is not a Top 10 automaker in China. The market share is 3.6%. Compared with Volkswagen, PSA Peugeot Citroen's performance is definitely terrible. PSA Peugeot Citroen has to catch up with its rivals or else there are few opportunities left for it.

　　However, is PSA Peugeot Citroen really able to run faster? If we use a vivid metaphor, can PSA Peugeot Citroen become Usain Bolt in China? It may be a little difficult.

　　First of all, is the partner of PSA Peugeot Citroen strong enough? Does the partner have enough energy? Till now Chang'an Automobile has already had two partners-Chang'an Ford Mazda and Chang'an Suzuki. What is Peugeot Citroen's strength? How could PSA attract Chang'an Automobile to increase investment?

　　Second, has PSA Peugeot Citroen really thought about itself? What are the reasons for being lagged behind for 25 years? If PSA sticks to the idea of developing high-end models, it may not be able to run.

　　Actually in the global market PSA Peugeot Citroen are not classified as a high-end brand. So why should it become a high-end brand? Based on the analysis about current situation, PSA Peugeot Citroen's expectations about Chinese market are too high. According to their expectations, PSA Peugeot Citroen will hold 8% share in China's auto market by the year of 2016. It may be difficult to achieve that goal. There is another important problem. Will the cooperation promote the status of Chang’an Automobile? When Chang'an decided to cooperate with Ford, the management of Suzuki was quite unhappy. (Chang'an and Suzuki had jointly developed business earlier.) At that time, Yin Jiaxu, the former President of Chang'an did not care about that. He did not want Chang'an to be bogged down by Suzuki. What about the result? Chang'an has grown stronger and Suzuki cannot show its disagreement.

　　Now PSA has arrived. Will it affect the relationship between Chang'an and Ford or the relationship between PSA and Suzuki? Will the impact become a positive one or a negative one? We'd better have a look. For now, Chang'an Automobile has a new option. After taking efforts to found partnership with Chang'an, PSA Peugeot Citroen should take a pragmatic strategy for China's market. (Translator: Qinghua/Hanxin)

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